International market and domestic fragrant rice markets integration in Pakistan: Evidence from quantile cointegration analysis

We study the relationship between export prices and domestic fragrant basmati rice markets in Pakistan over the period 2009 to 2022, combining monthly price data from five locations and six international references rice markets. Unlike previous studies, we use a quantile cointegration model to study market cointegration between the international and domestic rice markets. We find that cointegration is less likely when domestic prices are relatively low. In this, we argue that higher domestic prices will serve to motivate arbitrage thereby making domestic prices sensitive to export prices. Furthermore, we find evidence of inelastic relationship in which domestic prices seem insensitive to export prices. The results further suggest that if cointegration is more likely at the higher quantiles, then there might be an increase in sensivity, though an inelastic relationship remains.