Co-integration and causality analysis of castor markets in Telangana state

This study tested long-run spatial market integration between price pairs of castor in five major markets viz., Badepalli, Devarakadra, Gadwal, Nagarkurnool and Narayanpet of Telangana state by adopting econometric tools like Johansen's multivariate co integration approach, Augmented Dickey-Fuller (ADF), Granger causality test, and Vector Error Correction Model (VECM). The study confirmed the presence of co integration, implying the five years price association among the markets. To get the additional evidence as to whether and in which direction price transmission is occurring between the market pairs, Granger causality test was used, which confirmed Devarakadra to be the price-determining market. Devarakadra was found comparatively more efficient as it showed most unidirectional causal relations with other markets. The results showed that Devarakadra market influenced the prices in the other three major markets i.e., Badepalli, Gadwal and Narayanpet.