PRICE INSTABILITY AND TRANSMISSION IN MAJOR WHOLESALE TOMATO MARKETS OF TAMIL NADU: EVIDENCE FROM THE VAR APPROACH

Abstract

Tomato is a highly perishable vegetable crop with high price volatility and market uncertainty throughout the season. Knowledge of price behaviour and price dynamic transmission between wholesale markets is very important for market efficiency and to minimize marketing risks. The weekly wholesale price data of the major four wholesale tomato markets of Tamil Nadu (Coimbatore, Chennai, Dindigul, and Krishnagiri) for 2022–25 was analyzed through this study to understand the price behaviour, price instability, and dynamic price transmission of the tomato market. The Seasonal Index was used to examine the seasonal price behaviour, the Cuddy-Della Valle Instability Index (CDVI) to measure the price instability, and the Augmented Dickey-Fuller (ADF) test, Vector Auto regression (VAR), Granger causality, Impulse Response Function (IRF), and Forecast Error Variance Decomposition (FEVD) were applied for analysis of the dynamic price relationships. The findings showed strong seasonal price variation and high price instability in all the selected markets. All the price series were found to be stationary at level [I(0)] in the ADF test, which justifies the use of VAR model. The results from the VAR, Granger causality, IRF and FEVD analyses showed strong short-run price transmission with Coimbatore and Chennai being the most important price-discovery markets. The results indicate the requirement of reinforced implementation of post-harvest infrastructure, better market information system, and regular market arrival to minimize price volatility and improve the efficiency and resilience of the tomato marketing system in Tamil Nadu.