Causality Between White Pepper and Black Pepper: Evidence from Six Markets

The study of various spacial price relationships is indeed crucial and has been greatly sought after. Likewise, this study on pricing activity and competitiveness within the pepper industry is a rather debatable topic. Evidence from six markets within Sarawak has demonstrated that a long-run relationship between the pepper markets does actually exist. Using the modified Wald test, findings revealed that the white pepper prices do ‘Granger cause’ the black pepper prices in all divisions. However, there is no indication of a causal chain that runs from black pepper to white pepper. In other words, the prices of white pepper does affect the prices of black pepper, but not the other way round. Results suggest that the Sarawak regional pepper markets are highly integrated.