Informatika Pertanian Volume 15, 2006 835 INTEGRASI PASAR KENTANG DI INDONESIA ANALISIS KORELASI DAN KOINTEGRASI Potato Market Integration in Indonesia : Correlation and Cointegration Analysis Witono Adiyoga, Keith O. Fuglie and Rachman Suherman Peneliti Balai Penelitian Tanaman Sayuran ABSTRACT Market integration in potato was examined by using correlation and co-integration approaches. Utilizing daily, weekly and monthly potato price data in Jakarta, Bandung, Tanah Karo and Singapore were analyzed to determine the extent and nature of market integration. In general, the study of market integration can provide information on how the markets operate, that may be useful for improving price policy, monitoring price movements, making price prediction, and improving infrastructure investment policy. Under current price situation, it was hypothesized that potato markets in Bandung, Jakarta, Tanah Karo and Singapore are not integrated. Results indicate that correlation coefficients are not unequivocal indicators of market integration. High bi-variate correlation for two markets that do not trade with each other (segregated) is quite possible, if prices in each market are highly correlated via the price and trading relationship of a joint destination market. Further analysis suggests that the diagnostic approach of correlation coefficient in studying market integration should be used with cautious, because of some proven weaknesses that are inherent to this approach. The use of co-integration approach suggests that all of those markets are consistently integrated. The results are invariant to the type of data used (daily, weekly and monthly data). Co-integration is the statistical implication of the existence of a long-run relationship between economic variables (prices). In other words, from a statistical point of view, a long-term relationship means that the variables move together over time so that short-term disturbances from the long-term trend will be corrected. Integrated potato markets will help producers and consumers since the correct price signals can be transmitted down the supply chain. Consequently, consumers in some markets will not have to pay higher prices, and farmers will be able to grow a certain commodity according to their comparative advantages. This leads to more efficient use of resources.