Integration and Pricing Efficiency of Rice Market
This study Investigated performance of rice market in Nepal by analysing interdependence of prices (market integration) and efficiency of arbitrage (pricing efficiency) among the regional wholesale markets An Integrated approach to the analysis of performance of the market system was adopted The...
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| Format: | Thesis |
| Language: | English English |
| Published: |
1999
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/8245/1/FEP_1999_5_IR.pdf |
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| Summary: | This study Investigated performance of rice market in Nepal by analysing
interdependence of prices (market integration) and efficiency of arbitrage (pricing
efficiency) among the regional wholesale markets
An Integrated approach to the analysis of performance of the market system was
adopted The cointegration-based Johansen's Vector Error Correction Model
(VECM) was used for analysis of nature of interdependence of prices in the regional
markets to infer on integration Switching Regimes Model (SRM) was used to evaluate efficiency of arbitrage
between market regions related in direct trade to infer on pricing efficiency of the
market system The analysis results for market Integration and pricing efficiency
were interpreted In relation to the structural and behavioral characteristics of the
market system being Investigated through the rapid appraisal market survey The evaluation of results from estimation of the VECM lend support to the
hypothesis that regional markets for rice in Nepal are integrated to form a single
market area With Kathmandu as the central market Price shocks m the central
market gets quickly transmitted to the regional markets However, the results from
estimation of the SRM for the five market pairs provided statistical evidence of
violation of efficient arbitrage conditions This supports the hypothesis that the
integrated rice market in the country is not efficient m arbitrage sense Consideration
of behavioral characteristics of the market indicated inefficient integration of the
market regions could be due to lack of adequate institutional infrastructure in the
market that provided the large millers and traders to enjoy some degree of market
power
The study indicates that physical facilities in the market are necessary for integration
of the market, but these alone are not sufficient for a market system to be efficient
with expansion of the market through economic integration, need for provision of
appropriate institutional Infrastructure In the form of public and private order
institutions arises The government needs to play a crucial role in providing
institutional infrastructures to make the market more competitive, efficient and
equitable. |
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