Co-integration and causality analysis of castor markets in India

This study analyzed long-run spatial integration of castor prices across five major markets in India i.e., Kurnool, Bhabhar, Ramanagara, Sumerpur, and Narayanpet-using econometric tools such as Johansen's multivariate cointegration approach, Augmented Dickey-Fuller (ADF) test, Granger causality test, and Vector Error Correction Model (VECM). The findings confirmed the presence of cointegration, indicating a six-year price relationship among these markets. The results of the Granger causality test to explore the direction and extent of price transmission between states revealed unidirectional causality between the following market pairs Kurnool-Narayanpet, Kurnool-Ramanagara, Narayanpet-Ramanagara, and Sumerpur-Ramanagara. Additionally, the analysis showed that the Ramanagara market significantly influenced prices in three other major markets-Kurnool, Sumerpur, and Narayanpet. These results highlight strong inter-market linkages, with Ramanagara playing a pivotal role in driving price movements across the castor markets.