Measuring market integration in the presence of transaction costs?a threshold vector error correction approach

Market integration in agricultural commodities is vital for both developed and developing countries alike. If prices are not dreamily transmitted, then it may lead to biases in production and distribution. The strength of interdependence among markets and the speed in which the changes are passed through determine the degree of integration and the global efficiency of markets. This study examines the long-run and short-run integration of domestic and international wheat markets using Co-integration approach within the framework of Vector Error Correction Mechanism (VECM). A sample of two domestic wheat markets comprising two from the national wheat markets of Mathura (UP) and Khanna (Punjab) were selected along with two international wheat markets comprising from United States and Argentina. Analysis was carried out using the monthly price data between January 2003 and Dec 2019. Findings discovered that the prices became stationary merely upon first differencing. The presence of integration was confirmed among markets involving that there is price conduction.

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ANALISIS INTEGRASI SPASIAL PASAR CABAI MERAH KERITING DI JAWA TENGAH DENGAN METODE VECTOR ERROR CORRECTION MODEL

Jurnal Gaussian ◽

10.14710/j.gauss.v10i2.29007 ◽

2021 ◽

Vol 10 (2) ◽

pp. 190-199

Author(s):

Kenia Samantha ◽

Tarno Tarno ◽

Rita Rahmawati

Keyword(s):

Error Correction ◽

Granger Causality ◽

Market Integration ◽

Error Correction Model ◽

Vector Error Correction Model ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Regional Markets

Curly red chili (Capsicum annuum L.) is one of commodity which has a big influence to the national economy. To maintain the price stability of curly red chili, an integrated market is needed. Spatial market integration is the level of closeness of relations between regional markets and other regional markets. Spatial market integration will be modeled by the Vector Error Correction Model (VECM) method to see the closeness of both short and long term relationships. The object of this study is the price of curly red chili for several regions in Central Java, such as Kota Semarang, Kab. Demak, Kab. Pati, and Kab. Pekalongan in the period January 2016 to December 2019 where the data has met the stationarity test at first level of difference. In Johansen's cointegration test, it was obtained 3 cointegrations, which means that in each short-term period all variables tend to adjust to each other to achieve long-term balance. Granger causality test shows that there is a two-way relationship and the relationship affects one variable to another for all variables. The VECM model obtained has the MAPE accuracy value for HCMK Semarang 15.93%, Kab. Demak 17.61%, Kab. Pati 15.88%, and Kab. Pekalongan 14.49% which can be interpreted that the performance of the model is good. Keywords: Curly Red Chili, Spatial Market Integration, VECM, Johansen's Cointegration, Granger Causality

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Vertical Market Integration for Beef Prices Using Vector Error Correction Model (VECM) In Indonesia

International Journal on Advanced Science Engineering and Information Technology ◽

10.18517/ijaseit.11.3.9667 ◽

2021 ◽

Vol 11 (3) ◽

pp. 874

Author(s):

Rudi Wibowo ◽

Ahmad Zainuddin ◽

Rena Yunita Rahman ◽

Intan Kartika Setyawati ◽

Illia Seldon Magfiroh ◽

...

Keyword(s):

Error Correction ◽

Market Integration ◽

Error Correction Model ◽

Vector Error Correction Model ◽

Correction Model ◽

Vector Error Correction ◽

Vector Error ◽

Beef Prices ◽

Vertical Market

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Perilaku Harga dan Integrasi Pasar Bawang Merah di Indonesia

Jurnal Agro Ekonomi ◽

10.21082/jae.v35n2.2017.77-87 ◽

2018 ◽

Vol 35 (2) ◽

pp. 77 ◽

Cited By ~ 1

Author(s):

Reni Kustiari

Keyword(s):

Error Correction ◽

Market Power ◽

Market Integration ◽

Error Correction Model ◽

Vector Error Correction Model ◽

Correction Model ◽

Vector Error Correction ◽

Central Java ◽

Vector Error ◽

Consumer Prices

English Shallot is the main spice widely used in the Indonesian food cooking and servings that makes its demand continues increasing although its price highly fluctuates. This study is intended to analyze price behavior and shallot market integration in Indonesia. This study uses monthly producer and consumer prices data for 2011-2016. The price fluctuation was analyzed with the coefficient of variation. The market integration was analyzed with Johansen's cointegration approach using the Vector Error Correction Model (VECM). The study shows that both producer and consumer prices fluctuations increase after the introduction of Horticultural Product Import Recommendation policy. The Engle-Granger causality test shows that there is no causal relationship between the consumer and producer price of the shallot in Indonesia. The market power and market failure are attributed to the absence of causality. The results of forecast errors variance decomposition analysis indicate that the market in Central Java is the dominant market and can be used as a reference market in predicting the dynamics of consumers’ shallot price in Indonesia. Managing shallot production level and amount of shallot supplies in the Central Java markets is the keys for ensuring shallot price stability at national level. Indonesian Bawang merah merupakan bumbu masak yang utama bagi masyarakat Indonesia sehingga permintaan bawang merah meningkat terus, walaupun harganya berfluktuasi. Studi ini bertujuan untuk menganalisis perilaku harga dan integrasi pasar bawang merah di Indonesia. Studi ini menggunakan data harga produsen dan harga konsumen bulanan tahun 2011–2016. Fluktuasi harga dianalisis dengan koefisien variasi. Integrasi pasar bawang merah dianalisis dengan pendekatan kointegrasi Johansen menggunakan Vector Error Correction Model (VECM). Penelitian menunjukkan bahwa fluktuasi harga produsen dan harga konsumen meningkat sesudah kebijakan Rekomendasi Impor Produk Hortikultura diberlakukan. Uji kausalitas Engle-Granger menunjukkan bahwa antara harga konsumen dan harga produsen bawang merah di Indonesia tidak terdapat hubungan kausalitas. Hal ini dapat disebabkan oleh adanya market power dan terjadinya kegagalan pasar. Analisis dekomposisi varian kesalahan menunjukkan bahwa pasar Jawa Tengah adalah pasar dominan dan dapat menjadi acuan memprakirakan dinamika harga konsumen bawang merah di Indonesia. Pengelolaan tingkat produksi dan jumlah pasokan bawang merah di pasar Jawa Tengah termasuk sebagai kunci dalam menjaga stabilitas harga bawang merah secara nasional.

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