Analyzing the Spatial Integration of Rice Market in South Kalimantan Province, Indonesia: Using Vector Error Correction Model (VECM)

Market integration plays a key role in ensuring prevailed price signal in a market well transmitted to the other spatially connected markets.The actors in the market will get symmetrical information to prevent one party from exploiting another to get excessive arbitrage profit.This research aims to test the existence of integration in rice markets in South Kalimantan Province, Indonesia.Weekly composite rice price in three market locations, namely Banjarmasin City, Tabalong, and Kotabaru from July 2020 to March 2023 was observed.The unit root test to check stationarity data and the cointegration test were carried out.The ADF unit root test results showed that data were not stationary but became stationary after being differencing in level one.Johansen's cointegration results showed that there was a cointegration that represents long-term equilibrium between price variables.Due to the non-stationarity of data and the presence of cointegration, the Vector Error Correction Model (VECM) is used.The estimation results showed dominant and linear influences of rice price in Banjarmasin over rice price in Kotabaru, reviewed from significant level and elasticity amount in the cointegration equation, and its consistency with the results of Granger pairwise causality test and Impulse Response Function (IRF) graphic description.