Spatial Co-integration and Speed of Adjustment among Rice Markets in Bangladesh

Abstract

The structure of co-integration, the pace of adjustment, and the causal markets are investigated using horizontal price integration among five main rice markets in Bangladesh. The null hypotheses were tested using Johansen and Juselius co-integration test and vector error correction model. In Bangladesh, wholesale price volatility in the rice sector has been rising over time. The findings of the study revealed that the rice markets in Bangladesh are perfectly cointegrated. The leading rice markets are Chattagram and Rajshahi, while Khulna is the price taker, which adjusts prices with all other rice markets. Any price shock in the Chattagram and Rajshahi markets takes one to two months for other markets to adjust. The findings also illustrate the value of steering policy efforts in Bangladesh rice markets toward reducing price instability and improving pricing efficiency.