Price efficiency in tuna fish marketing in Sri Lanka - An application of cointegration approach.
Y.Y.K. DE SILVA, P.S.K. RAJAPAKSHE AND K.H.M.L. AMARALAL
The intention of this study was to investigate whether the tuna fish markets in Sri Lanka were integrated to bring efficiency in the marketing system. The empirical analysis of this paper was based on time series monthly data of tuna fish prices in selected wholesale and retail fish markets in Colombo, Kalutara and Kandy during the time period of 2000 to 2004. The bivariate price series correlation and Engle-Granger test were used to analyze the market cointegration for Sri Lanka tuna fish markets. The Augmented Dickey Fuller (ADF) test was applied to test the stationary of the price series. To check the short run dynamics of fish markets the Error correction model was applied. The bivariate correlation coefficients for six selected market pairs ranged between 0.403 and 0.85. The highest correlation coefficient value (r) was observed from the market pair of Colombo and Kalutara retail markets. The lowest 'r' value was observed from the market pair of Colombo and Kandy wholesale markets. All the selected six tuna fish markets price series were found to be non-stationary when ADF test was carried out. The results revealed that the price series for tuna fish prices in the selected six markets were stationary after first difference. The cointegration test and error correction model revealed that all the selected tuna fish markets in Sri Lanka were integrated and showed short run stability. In this case the results revealed that the tuna fish markets in Sri Lanka were somewhat competitive. But, further, government intervention needs to improve competitiveness of tuna fish marketing and to enhance the market efficiency.