Market Integration and Price Transmission in Poultry Products Markets of Punjab, Pakistan

Abstract

This study seeks to explore the degree of market integration and price transmission in poultry products markets of Punjab. Time series data of daily prices of poultry and egg for about 980 days were collected from Poultry Research Institute Rawalpindi (PRI). The data then manipulated in average weekly prices and converted into 140 observations for the time period of October, 2009 to May- 2012. Augmented Dickey Fuller (ADF) test was used to check the stationarity of data. ADF results shows that all variables were stationary at first difference.  Johnson Cointegration and Granger Causality techniques were used to analyze the data. Augmented Results revealed that markets of Lahore, Rawalpindi, Faisalabad and Multan were integrated with each other for price transmission and related physical arbitrage. The results of linear Granger Causality analysis led us to the conclusion that regardless of the sample considered, there was uni-directional relationship or in other words short-run uni-directional causality exist between the variables. It is suggested that government should regulate poultry products prices so that benefits could move from big businessman to small ones. Small businessman associations should be established who determine the prices of day-old chicks and egg. In this regard, government should facilitate these associations in regulating their activities.

Keywords: Market integration, Cointegration, Granger Causality, Physical arbitrage and Price transmission.