Decontrolling, Price Transmission and Market Integration of Sugar Sector in India vis--vis Global market A cointegration Analysis (original) (raw)
This paper has investigated the export volatility, identified the structural breaks and determined the short-run and long-run relationships between onion export and domestic prices using cointegration and Granger causality test. The study is based on the monthly arrival data of five major regulated markets from three major onion-producing states of India, namely Azadpur from Delhi, Lasalgaon, Pune and Solapur from Maharashtra, Bangalore and Hubli from Karnataka along with the export price. After checking for the presence of seasonal and non-seasonal unit roots, suitable SARIMA model has been applied for modelling the onion export. The ARCH-LM test has been applied to find the presence of conditional heteroscedasticity. To model the conditional heteroscedasticity as well as asymmetricity in volatility, exponential GARCH model has been applied. The analysis of structural breaks in volatility has revealed the situations of price shocks in the years 2007, 2010, 2011 and 2013, when onion prices went abnormally high and created disturbances in the markets. The application of Johansen method of cointegration has revealed that prices in all the markets share stable long-run relationship. The Granger causality test has shown that all the major domestic markets of onion Granger cause export prices on one hand and export prices Granger cause prices in Delhi, Bangalore, Hubli and Solapur markets. These results have been supported by the impulse response function.