The spatial integration of the rice market is of major importance in Nepal, given the
difficult terrain, the long distances between market sources of the Terai and the hill
districts, and the implications of these factors for food security. An assessment of spatial
integration across different rice markets in eastern terai region ofNepal was done with the
aim of recommending government with appropriate policy measures to arbitrage
agricultural trade and improving public distribution system for contributing to overall food
security. Monthly average coarse rice price series o~ three major rice marketing networks
namely Jhapa, Biratnagar and Lahan were collected for five years (2005-2010) from
secondary sources. The Augmented Dickey Fuller (ADF) test showed that the price series
were stationery. The Vector Error Correction model estimated that price series of
Biratnagar-Jhapa pair were co-integrated whereas the same of Lahan-Jhapa and LahanBiratnagar
pairs were not co-integrated. The results indicated that the nearby rice markets
were co-integrated and the markets located relatively far apart were not. The price
trailsmission was found inefficient between the markets.

The spatial integration of the rice market is of major importance in Nepal, given the
difficult terrain, the long distances between market sources of the Terai and the hill
districts, and the implications of these factors for food security. An assessment of spatial
integration across different rice markets in eastern terai region ofNepal was done with the
aim of recommending government with appropriate policy measures to arbitrage
agricultural trade and improving public distribution system for contributing to overall food
security. Monthly average coarse rice price series o~ three major rice marketing networks
namely Jhapa, Biratnagar and Lahan were collected for five years (2005-2010) from
secondary sources. The Augmented Dickey Fuller (ADF) test showed that the price series
were stationery. The Vector Error Correction model estimated that price series of
Biratnagar-Jhapa pair were co-integrated whereas the same of Lahan-Jhapa and LahanBiratnagar
pairs were not co-integrated. The results indicated that the nearby rice markets
were co-integrated and the markets located relatively far apart were not. The price
trailsmission was found inefficient between the markets.