Co-integration and Causality Analysis of “Castor” (Ricinus communis Oil) Markets in India

Abstract

Castor (Ricinus communis L.) is a major industrial oilseed crop. Because of its numerous uses in the manufacturing of a wide range of industrial uses, castor oil has risen significantly in importance in the global economy. The study examined market integration in major Castor markets in India, including Dhanera, Patan, Kurnool, and Yemmiganur. The co-integration analysis conducted revealed a high level of market integration, as evidenced by the significant positive and negative values of weekly Castor prices across all markets. Unit root tests indicated that the markets were non-stationary, but became stationary when analyzed at the first difference. Further analysis using Johansen's tests identified three cointegrating equations among the markets. The results of the Vector Error Correction Model (VECM) demonstrated long-term price influences between markets. Specifically, Dhanera was found to be influenced by its own price, as well as by prices in Patan and Yemmiganur. Patan, on the other hand, was influenced by its own price, as well as by prices in Dhanera and Yemmiganur. Additionally, Kurnool and Yemmiganur were influenced by prices in neighboring markets.