Integration of the Rice Market in Aceh

The study is an attempt to examine and to evaluate the pricing efficiency of the medium quality rice market in Aceh, Indonesia through measuring the degree of market integration. Seoondary data were used in this study. Analysis was carried out on the basis of a priori theoretical, statistical an:i econometric criteria by using the Time Series Processors (TSP). The study utilises three models to test the efficiency of the rice market in Aceh, namely correlation coefficient, Ravallion's and Sims' models. The result indicates that the correlation coefficients are vague and spurious. The results produced by Ravallion's model indicate that, except for Aceh Pidie, the central market (Aceh utara) appears to take the role as the price leader over that of the other three local markets, i.e., Aceh Barat, Aceh Tenggara and Aceh Timur. Aceh utara's retail price is statistically significant in influencing retail prices of the three local markets. Seasonality factor is apparently significant only in Aceh Pidie and Aceh Timur. 'The results given by Sims' model indicate that, except for Aceh Pidie, the causal relationship between retail prices in the central market and local markets is unidirectional such that retail price in the central market leads retail prices in the local markets. A hi-directional feedback exists among retail prices in the local markets and between farm and retail prices in all sample districts. It can be concluded from these results that rice prices both at retail and farm levels in Aceh's rice market behave interdependently, hence implying an integrated market.

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