Spatial linkages of green chili prices between a dedicated economic centre and other regional markets in Sri Lanka

Abstract

This study assesses the green chili markets in Sri Lanka from 2012 to 2016 by examining the degree of market integration in the country. The analysis was carried out in the first differenced form, which conformed to the Augmented Dickey-Fuller tests of stationary. The pairwise comparison between Dambulla Dedicated Economic Centre (DDEC) and 25 other regional markets in Sri Lanka was carried out. All market pairs co-integrated with the price at DDEC in the long run according to the results of Johansen Co-integration test. Therefore, the DDEC has clearly played an important role in price discovery in the long run. Error correction terms indicated that the adjustment process from shortterm disequilibrium in prices to long run price equilibrium is slow providing evidence of weak short run co-integration in green chili markets in Sri Lanka. Results revealed only six regional markets out of 25 had serial correlation in the short run. Negative coefficients of prices in the short term indicated that some unknown factors are playing predominant role in spatial price transmission such as sluggishness in market convergence and inappropriate involvement of middleman in the market chain. Farm gate to the collecting centre and collecting centre to the regional markets were identified as the main two points in the market channel where high price influence has occurred. A systematic government inspection and a strong market information system could prevent such short term price disequilibrium in the regional chili markets in Sri Lanka to a greater extent.

Spatial Integration of Vegetable Markets of Sri Lanka during COVID-19 Pandemic

“…A study conducted by Jayasinghe-Mudalige (2006) on spatial integration of regional rice markets in Sri Lanka suggested that the prices in several selected rice markets were highly integrated both in the short-run and long-run perspectives. Another study by Thamiem et al (2010), on market integration of Sri Lankan milk market revealed that the prices of central milk markets in the country significantly influence the price levels in the neighbouring regional markets while transmitting to the regional markets at a degree of 0.24 to 1.02 within a geographical region. De Silva (2006) examined price efficiency in tuna fish marketing in Sri Lanka.…”

“…Findings revealed that all the tuna fish markets were integrated and showed short-run stability and were somewhat competitive. To the best of the authors' knowledge, only Sandaruwani (2018) examined the spatial integration of vegetable markets in Sri Lanka. Her findings showed that only six regional markets for green chili, out of the 25 markets examined, were integrated with DDEC.…”