The Spatial Integration of Vegetable Markets in Nepal

This paper analyzes the spatial integration of vegetable markets in Nepal using weekly wholesale price and retail price data for three years. The maximum likelihood method of cointegration developed by Johansen (1988) was used in the study, which specifically examines if inter-regional vegetable markets are integrated and linked together into a single economic market. The dynamics of short-run price responses were examined using the vector error correction model (VECM). The results indicated that the higher the perishability, the lesser the integration was among wholesale markets and among retail markets of different vegetables. By examining the short-run price adjustment, it was found that almost all vegetable markets reacted on the long-run cointegrating equations while the speed of price adjustment in the short-run was almost absent. Moreover, it was found that the longer the distance between markets, the weaker the integration was. To increase the efficiency of vegetable markets in Nepal, there is a need to focus on building an improved market information system. This system should be able to disseminate timely market information about price, demand, and supply of products to enable producers, traders, and consumers to make proper production and marketing decisions.