Trade liberalization and Primary Commodity Prices Empirical Evidence from Select Tropical Crops in Kerala, India

Agriculture sector in India underwent unprecedented policy changes in 1990’s. These policy measures were expected to have significant impact, among others, on integrating domestic commodity markets with world market. This paper undertakes an empirical verification of above hypothesis with respect to select plantation crops in Kerala (India), known historically for plantation agriculture by estimating Engle and Granger Error-Correction model. Period wise analysis reveals that markets were integrated even before liberalization except in cardamom, and the extent of integration got accentuated in post reform period in all the crops. Moreover, the estimated short run and long run elasticity coefficient implies that increased extent of integration or transmission of world price to domestic market was mainly on account of short-run rather than long –run. I would like to express our immense gratitude to K.J Joseph for his valuable suggestions and comments during the preparation of this paper