distinguishing between equilibrium and integration in spatial price analysis this article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price transfer cost and trade flow data this method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability competitive market equilibrium perfect integration segmented equilibrium and segmented disequilibrium one can also use these estimates to derive semiparametric measures of time varying regime probabilities to track changing market conditions an application to trade in soybean meal among pacific rim economies demonstrates the usefulness of the method copyright 2002 oxford university press

integration of spatial markets studies of spatial market integration draw their implications from a theory which assumes that there are no intraregional transport costs an alternative theory is offered based on the assumptions that buyers and sellers are spatially dispersed and intraregional transport costs are significant this implies that the market is a linked oligopoly or oligopsony and that market integration tests are tests of alternative oligopoly price formation processes for example collusive basing point pricing produces results typically assumed to imply efficiently integrated markets while competitive fob pricing does not the theoretical implications are illustrated with an analysis of hog prices in canada

spatial price discrimination in agricultural product procurement markets a computational economics approach significant transport costs and spatially distributed supply and processing create oligopsony power in agricultural markets price discrimination expressed in the form of partial or complete absorption of freight charges by processors is often observed in these environments but we understand little about how these pricing decisions are made analytical approaches are often intractable as an alternative we propose a computational economics approach to analyze a general spatial competition model and study firms choices of spatial pricing policy instead of the commonly presumed free on board pricing we find that buyers choose price discrimination either through uniform delivered pricing or through partial freight absorption

examining dynamically changing timber market linkages market integration has been widely studied in the past to gain a better understanding of how different markets for the same good interact with one another traditional cointegration tests have been used to perform these analyses however these tests can only reveal the presence of stable or average long term relationships to evaluate market dynamics over time we modify a time varying smooth transition autoregressive tv star model to examine pine stumpage markets in the us south the proposed model incorporates an economic indicator and allows us to evaluate market integration as it changes throughout a specified time period the potential significance of this work is twofold first market integration can be observed as a function of an economic indicator and secondly the proposed model will allow us to draw inference about market integration at specific time points

estimating the degree of market integration existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination this article proposes new measures of market integration defined directly in terms of a well known spatial price determination model and develops an econometric methodology for estimating these measures due to the intractability of the conditional density function of prices we use indirect inference to estimate the model parameters and market integration measures the methodology is illustrated with simulated data and is applied to soybean price data for the united states brazil and the eu copyright 2008 oxford university press

empirical effects of short term export bans the case of african maize abstract temporary export restrictions have been widely used in recent years in an attempt to stabilize domestic prices of staple grains i use monthly market level price data to investigate the empirical effects of 13 short term export bans on maize implemented by 5 countries in east and southern africa i find no statistically significant effect of export bans on the price gaps between pairs of affected cross border markets my results for price gaps match those from a model simulation in which export bans are not implemented however prices and price volatility in the implementing country are significantly higher during export ban periods in the data than in the model simulation with no bans export bans in the region are imperfectly enforced divert trade into the informal sector and appear to destabilize domestic markets rather than stabilizing them

the extent pattern and degree of market integration a multivariate approach for the brazilian rice market the extent pattern and degree of integration are analyzed in a multivariate system with cointegrating restrictions the extent of the market is found by identifying locations that are linked by trade and where prices share identicall ong run information permanent component the pattern of integration characterizes interdependence and is analyzed by estimating a vector error correction model the degree of integration is calculated with persistence profiles of the long run relations we demonstrate that bivariate models are inadequate for capturing the spatial dynamics of price adjustment the methodology is applied to the brazilian rice market and policy implications are

how is the liberalization of food markets progressing market integration and transaction costs in subsistence economies we propose a modification of baulch s parity bounds model to measure the market integration of food markets in developing countries instead of extrapolating a single observation of transaction costs we estimate transaction costs predicted transaction costs compare well with survey data of traders probabilities of market regimes computed on the basis of predicted transaction costs fluctuate significantly and do not support fixed regime probabilities over time the probability of market integration with trade decreases consistently during food shortages increasing either the probability of no trade or loss making trade or the probability of profitable but unexploited trade opportunities the data further support a negative trend in market integration with trade

export restrictions do consumers really benefit the wheat to bread supply chain in serbia abstract our approach combines price transmission and gross margin analysis at different stages of the wheat to bread supply chain results suggest that the effects of export restrictions on the end consumer prices for bread and thus food price inflation heavily depend on the price behavior of the intermediates in contrast to theory consumers in serbia experienced welfare losses despite comprehensive governmental market interventions in particular consumers were confronted with increasing flour and bread prices which cannot be fully explained by increasing production costs whereas mills bakeries and retailers increased their profits thus export controls in combination with high price volatility in the supply chain have to be considered as a further factor driving food price inflation

empirics of hills plateaus mountains and plains a markov switching approach to growth abstract most economic growth research has been aimed at explaining cross country differences in average growth rates however it is well known that growth experiences differ over time within a country almost as much as they differ among countries this paper builds on pritchett s 2000 pritchett lant understanding patterns of economic growth searching for hills among plateaus mountains and plains world bank economic review may 2000 14 2 221 250 observation that the growth process can be thought of as transitions between different growth regimes and proposes a framework for systematic analysis of such regimes and the dynamics of the transitions i estimate a markov switching regression to characterize four distinct growth regimes and transitions between them the results show that countries switch among regimes of stable growth miracle catch up stagnation and crisis with the transition probabilities determined by the quality of institutions better institutions appear to improve long run growth by making episodes of fast growth more persistent low average growth rates in countries with weak institutions are a result of these countries spending more time in stagnation regimes rather then being incapable of fast growth at all weak institutions do not rule out growth takeoffs but limit their sustainability the approach directs attention to shifts in growth performance and highlights the fact that identical average growth rates can mask very distinct growth paths

market definition in antitrust analysis a regression based approach alleged violations of either sherman 2 s antimonopoly strictures or clayton 7 s proscriptions against anticompetitive mergers necessarily involve a particular product and must occur in a particular place that is the plaintiff in either a 2 or 7 suit must define a relevant market within which the violation alleged has occurred even in the most mundane antitrust analysis however market definition is rarely readily accomplished and unaccompanied by a series of caveats and the possibility of the opposing parties in an antitrust suit failing to contest each other s proffered definition is virtually nil 2 because economists from

us and canadian livestock prices market integration and trade dependence cointegration of canadian and us livestock prices points to the existence of market integration in the period january 1996 to december 2004 trade flows of livestock and beef products were nonexistent between canada and the united states for many months in 2003 and 2004 suggesting market segmentation this lack of trade in beef and livestock was due to livestock beef import bans by both countries due to bovine spongiform encephalopathy it was also determined that canada s trade dependence in livestock and beef is cointegrated with canadian and us livestock prices however as the trade dependence variable is shocked the effects on canadian and us prices are opposite although one would expect that in an integrated market the price responses to an exogenous shock would be similar or statistically identical this result reinforces the case against the use of price cointegration analysis in determining presence or absence of market integration empirical results in this article raise some very difficult q

the transmission of world maize price to south african maize market a threshold cointegration approach this article seeks to provide an explanation for the relationship between domestic maize price in south africa and world maize prices in order to evaluate comovement and transmission of world prices to domestic prices in sub sahara african countries this is done by comparing nested and nonnested models that capture different forms of nonlinearity in the price spread adopting a bayesian approach that allows for comparison of models using bayes factor we found that the relationship between south african price and world price for maize indicates the presence of nonlinearity in price transmission with three regimes that is triggered by the price spread in previous period

the effects of ncpb marketing policies on maize market prices in kenya the government of kenya pursues maize marketing policy objectives through the national cereals and produce board ncpb which procures and sells maize at administratively determined prices and stores maize as a contingency against future shortages a private sector marketing channel competes with the ncpb this article estimates the effects of ncpb activities on the historical path of private sector prices in kenyan maize markets between 1989 and 2004 the analysis is carried out using a reduced form vector autoregression model var estimated with sparse data and imposing only minimal identification restrictions results show that ncpb activities have stabilized maize market prices in kenya reduced price levels in the early 1990s and raised average price levels by roughly 20 between 1995 and 2004 over the past decade the price raising activities of the ncpb have transferred income from urban consumers and a majority of small scale farm households that are net buyers of maize to a relatively small number of large and small scale farmers who are sellers of maize

wheat export restrictions and domestic market effects in russia and ukraine during the food crisis abstract studies investigating the effects of wheat export controls on the domestic market in the exporting country itself are scarce this paper analyses the domestic market impact of wheat export controls in russia and ukraine during the 2007 2008 global food crisis within a spatial price transmission approach using a markov switching vector error correction model we contrast our estimation for russia and ukraine with germany and the usa two countries that did not intervene in their wheat export markets an explicit crisis regime during times of export controls is exclusively identified for russia and ukraine we find that export restrictions temporarily reduced the degree of integration of russian and ukrainian domestic markets in world wheat markets which pushed the growers prices below their long run equilibrium level further domestic markets were disconnected from their equilibrium and market instability increased these effects were even more pronounced and long lasting in ukraine export quota than in russia export tax the negative market effects discouraged private investors thereby preventing russia and ukraine from maximizing their grain potential and contributing to global food security

a welfare measure of consumer vulnerability to rising prices of food imports in the uae abstract the recent and expected continuing rise in food prices has re ignited concern and discussion in the united arab emirates about the country s vulnerability to food supply shocks defining vulnerability as the compensating variation relative to household income we find that although uae households in the lowest income quintile spend on food on average less than a quarter of what households in the highest income quintile spend the former are 3 5 times more vulnerable to rising prices of food imports than the latter

cross country maize market linkages in africa integration and price transmission across local and global markets in order to study short run price shock propagation we model twenty seven sub saharan africa ssa domestic maize markets within a global vector autoregression framework the main purpose is to fully embed multilateral trade flows as a way to better structure local price transmission dynamics and interdependencies and get a more comprehensive picture of food price shocks propagation we found significant between country market contagion and prompt regional price shock propagation when trade connection exists yet the integration of ssa domestic maize markets within the continent and with global markets remains generally weak furthermore under regular market conditions most local price series appear to be more responsive to regional neighbors than to global shocks

market analysis methods are our enriched toolkits well suited to enlivened markets the past fifteen years have brought historic reduction of government intervention in agricultural markets in the developing world most economists and policy makers believe these reforms enliven markets previously fettered by excessive government authority nonetheless the impact of market oriented reforms on the spatial and intertemporal extent and the competitiveness of markets remains an inherently empirical question meanwhile there also have been major innovations in methods used to analyze markets and prices due largely to the rapidly emerging time series econometric literature agricultural economists toolkits have changed nearly as rapidly and dramatically as have developing economy markets but can these enriched toolkits answer the

the gains from merger or collusion in product differentiated industries a merger in an industry with differentiated products increases the market power of the merging firms to the extent that their products are close substitutes and that other firms produce only more distant substitutes such a merger makes the residual demand curve of each partner steeper by shifting each in the direction of the industry demand curve 2 the extent of this increase in market power depends upon the own elasticity of demand for each merging firm s product as well as the cross elasticity of demand for each with all other firms products as a result evaluating the effect of a merger between two firms with n 2 other competitors would seem to require the estimation of at least n2 parameters all of the price elasticities of demand a formidable task that extremely difficult estimation task is unnecessary however the necessary information is contained in the slopes of the two single firm residual demand curves before the merger and the extent to which the merged firm will face a steeper demand curve for example suppose a merger between two u s brewing firms say pabst and anheuser busch were proposed it is not particularly important to determine whether it is competition from miller or competition from stroh or from heileman or which puts the most effective brake on anheuser busch s pricing only the total effect of these other firms and the particular effect of competition from pabst are of interest this paper proposes econometric procedures for estimating the demand system that merger partners will face based only on pre merger data the key to the procedures is that the effects of all other firms in the industry are summed together formally we start with a model of an n firm product differentiated industry manipulation of the model removes the prices and quantities of all but two firms this reduces the dimensionality of the problem to manageable size rather than an n firm demand system we estimate a two firm residual demand system in this way the technique extends our econometric method for

the extent of the market examines the classical theory of the market in this paper authors consider the role of price market determination price movement in competitive and monopolistic markets extension of commodity markets

price transmission analysis a flexible methodological approach applied to european pork and lamb markets the study of spatial price relationships helps to explain market performance and their degree of integration applying only one method of analysis may not be flexible enough to account for the complex interactions of prices in separated markets this paper complements usual cointegration tests with a description of dynamic features and patterns of causality among price series the method proposed is applied to study spatial pork and lamb prices relationships within the eu in the period 1988 1995 the results indicate that european markets for both commodities are integrated not only in the long run but in the short run as well although the price transmission process is more efficient in the porkmeat industry

pricing efficiency in centralized and noncentralized markets pricing efficiency in centralized markets is compared with that in noncentralized markets on the basis of a price formation model centrally discovered prices are hypothesized to adjust more slowly to equilibrium but to have lower unpredictable variability than noncentrally discovered prices these hypotheses are borne out strongly in market experiments mean squared error is found to be lower in centralized than in noncentralized trading suggesting centralized markets are the more price efficient

measuring the impact of road rehabilitation on spatial market efficiency in maize markets in mozambique this article analyzes the impact of road rehabilitation on the spatial market efficiency of maize markets in mozambique we estimate a modified version of the parity bounds model pbm that allows us to test the impact of road rehabilitation on spatial efficiency this article seeks to contribute to the existing literature in three ways first a unique data set where road rehabilitation episodes between market pairs are identified is developed second special care is devoted to estimation of transaction costs due to the sensitivity of the pbm model to the quality of transaction costs estimates finally as opposed to most existing literature that focuses on relatively distant markets the article focuses on spatially closed markets we find that maize markets tend to be segmented due to high transport costs following road rehabilitation inefficiency and average absolute price differentials tend to decrease and market pairs have tended to shift toward autarky regimes overall while the results point broadly toward a positive impact of road rehabilitation on spatial efficiency they are not as strong or as robust as one would like large increases in fuel prices likely offset the positive impacts of road rehabilitation on transaction costs contributing to the increase in the probability of being in an autarky regime

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

on the extent of the market wholesale gasoline in the northeastern united states this paper develops the classical view of the extent of markets by introducing explicitly in the analysis the concept of arbitrage costs arbitrage or transaction costs imply that market boundaries are essentially stochastic while a set of products or regions may have binding arbitrage conditions i e may be in the same market at a given point in time they may not at another thus in defining a market the probability that a set of agents or regions would h3ve binding arbitrage conditions has to be assessed this paper develops an econometric methodology to estimate the transaction costs required to arbitrage among a given set of products as well as the probability that that set of products would be bound by binding arbitrage condi tions finally the methodology is applied to wholesale gasoline in the northeastern part of the united states address for communications pablo t spiller herbert hoover memorl l bldg 9348 stanford ca 94305

spatial integration at multiple scales rice markets in madagascar the dramatic increase in the price of rice and other commodities over the past year has generated new interest in how these markets work and how they can be improved this article uses an exceptionally rich data set to test the extent to which markets in madagascar are integrated across space at different scales of analysis and to explain some of the factors that limit spatial arbitrage and price equalization within a single country we use rice price data across four quarters of 2000 2001 along with data on transportation costs and infrastructure availability for nearly 1 400 communes in madagascar to examine the extent of market integration at three different spatial scales subregional regional and national and to determine whether non integration is due to high transfer costs or lack of competition the results indicate that markets are fairly well integrated at the subregional level and that factors such as high crime rates remoteness and lack of information are among the factors limiting competition

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

seasonality and spatial integration in agricultural product markets abstract the recent testing approaches of the law of one price which are based on co integration analysis are modified by incorporating the seasonal components of the agricultural price series into the testing procedure application of the modified testing approach to the soft wheat market of five european union member states produces mixed results as some of the markets turn out to be integrated while in some cases a unified market cannot be assumed these results differ in some cases from those obtained by co integration tests which ignore seasonal unit roots

modelling trends in food market integration method and an application to tanzanian maize markets abstract pushed by increasing availability of price data and extensive market liberalisation efforts in many developing countries research on food market integration has evolved rapidly over the last two decades empirical methods to measure market integration diverged in two directions on the one hand there is the parity bounds model pbm using a switching regressions technique while on the other hand the use of threshold autoregressive tar models has been proposed this article provides a discussion on the two methods and argues that tar models are better able to capture the dynamics of the arbitrage process underlying interconnected markets furthermore we extend the standard tar model to include a time trend in both the threshold and the adjustment parameter using weekly maize price data on seven selected markets in tanzania we illustrate how both transaction cost and the speed of adjustment have changed during the nineties

testing restrictions on a model of japanese meat demand tests for quasi separability net substitutability and perfect substitutability are developed and implemented on an almost ideal demand system model of the japanese meat sector the data set satisfies both symmetry and homogeneity there is evidence of net complimentarity between chicken and dairy beef and chicken and pork the tests indicate that japanese wagyu beef is considered a separate commodity to both imported beef and dairy beef the results also indicate that fish can be treated as separable in the japanese meat demand system

rice market integration and food security in nepal the role of cross border trade with india coarse rice market integration between nepal and india is analyzed applying a threshold autoregressive model the price response behaviour of traders is found to be consistent with an asymmetric price adjustment mechanism indicating coarse rice prices in nepal respond to shocks originating in india the results show that adjustments to negative price deviations from long run stable equilibrium are faster than adjustments to the positive ones given a null threshold given that trade flows mainly from india to nepal nepali traders would adjust their prices upward to align with the long run equilibrium value relatively more quickly in the case of negative price deviations than if the price deviations were positive such a high speed of adjustment to negative price deviations could be detrimental to net food buyers food security status in the absence of a price stabilization mechanism however a price stabilization policy in nepal a food deficit and import dependent country would hardly have any effect on prices unless further effort is made to build up the level of national food reserves for short term food security interventions in the current context of structurally low levels of national food reserves an alternative short term policy such as foreign aid in the form of food or income transfers targeting the most vulnerable households to price increases is necessary through social safety net programmes in the long run an improvement of transportation infrastructure between market hubs other than the biratnagar trade basin in the terai nepal and india would contribute to the reduction of transaction costs and create incentives for more competition in formal cross border trade with india in times of negative shocks such as the high food price crisis in 2008 restrictive food trade policies in india will continue to undermine household food security in nepal

what drives local food prices evidence from the tanzanian maize market this study quantifies the relationship between tanzanian and external maize markets while also accounting for domestic influences it concludes that external influences on domestic prices originate from regional rather than global markets it also shows that compared to external factors domestic factors exert a greater influence on tanzanian maize markets further the mechanisms through which trade policies influence maize markets involve interactions with both external market shocks and domestic weather shocks overall it provides evidence that the intermittent imposition of export bans in tanzania has had adverse impacts on its maize markets and consequently on the development of its agrarian economy

rent capture analysis of ontario s stumpage system using an enhanced parity bounds model we develop and use an enhanced parity bounds model epbm to examine the discrepancy between the stumpage price administratively determined under ontario s current stumpage pricing system and the market value of stumpage covering from june 1995 to january 2007 the results show that in the short run the stumpage prices were below or above the market values however in the long run the underpayment and overpayment will even out each other the results imply that ontario s stumpage pricing system has the ability to capture the full economic rents in the long run and the results also have other policy implications

markov switching estimation of spatial maize price transmission processes between tanzania and kenya we discuss the markov switching vector au toregressive ms var class of nonlinear time series models that can be used to analyze recurring discrete structural changes in time series hamilton s 1989 seminal markov switching ms model of the u s business cy cle triggered considerable interest in the ms approach in economics most empirical appli cations to date have focused on the business cy cle and financial markets but we see potential for ms var models in agricultural economics for example in price transmission analysis in the following we first provide an overview of the ms var framework we then present an illustrative application to maize price trans mission between tanzania and kenya the article closes with a discussion of strengths weaknesses and potential uses of the ms var approach in price transmission analysis

market integration efficiency of arbitrage and imperfect competition methodology and application to u s celery this paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage application of the methodology requires only time series data on prices for alternative cities regions countries or product forms yet the approach is capable of generating evidence on a number of market parameters including market integration arbitrage efficiency the magnitude of marketing margins product substitutability and competitiveness of markets estimation is based on a switching regression model with three regimes efficient arbitrage relative shortage and relative glut results from application of the model to u s celery marketing indicated significant departures from efficient arbitrage for both california and florida celery

monopoly and quality distortion effects and remedies a monopolist that sells in a market in which consumers differ in their willingness to pay for quality will distort and enlarge the range of products offered for sale we examine the positive and normative impacts of remedies used to counteract such distortions for the case of a price ceiling the monopolist improves quality at the low quality end of the market offsetting the distortion induced by the unregulated exercise of monopoly power social welfare can be shown to increase for a sufficiently slight degree of price regulation for minimum quality standards the social welfare implications are ambiguous because the standards may exclude some consumers from the market

transfer costs spatial arbitrage and testing for food market integration conventional tests for food market integration ask often misleadingly whether prices in different locations move together in this paper an alternative methodology the parity bounds model pbm is developed which uses information on transfer costs in addition to food prices to assess the efficiency of spatial arbitrage monte carlo experiments using data generated by a point space spatial price equilibrium model show the pbm to be statistically reliable an application to philippine rice markets demonstrates that the pbm detects efficient arbitrage when other tests do not

price ceilings in competitive markets with variable quality abstract this paper analyzes the impact of a price ceiling on a competitive market for a good which yields a utility bearing characteristic the household characteristic producing technology is linear firms have u shaped cost curves in quantity and in total amount of characteristic produced essentially the market is cleared by an equilibrium hedonic price the hedonic price rises in response to the excess demand gap induced by a ceiling on output price bringing the market from an unconstrained equilibrium into a constrained equilibrium a price ceiling also leads to a fall in quality a fall in consumer welfare and locally a rise in producer welfare

environmental food taxes and inequalities simulation of a meat tax in sweden abstract this paper investigates the distributional effect of an environmental tax on meat in sweden if such a tax was to be introduced welfare effects are measured as compensation variation cv for multiple price changes where hicksian cross price elasticities household expenditures and price changes are included in the calculations results show that taxes on meat are almost neutral over households when expenditures on meat are used as welfare indicators and regressive if income is used this can be explained by the households similar shares of total expenditures on meat the households with the smallest income levels need to be compensated with 904 sek per person and year equivalent to euro 86 6 per year in the year 2009 exchange rate to feel that utility is not lowered if taxes on meat are introduced and the households with the highest income levels need to be compensated with 1141 sek euro 109 3 per person and year for the year 2009 these compensations correspond to 0 74 and 0 78 of total expenditures for the low and high income group respectively when instead comparing the compensation with income levels the effects correspond to 0 99 for the households with the smallest income levels and to 0 51 for the households with the largest income

threshold cointegration and spatial price transmission when expectations matter we examine the performance of the threshold cointegration approach specifically band tvecm to price transmission analysis in an explicit context where trade decisions are made based on expectation of final prices because trade takes time we find that following a standard inference strategy a large portion of three regime cases are not identified as such results show that transfer costs are systematically underestimated particularly in three regime models the speed of price transmission is also biased in three regime models furthermore inferences about occurrence of trade are poor with estimated models suggesting far lower market integration than is true in the data generating process

testing market integration a model of spatial price differentials for a tradable good is proposed which avoids the inferential dangers of received methods using static price correlations the proposed method also extracts more information on the causes of price differentials from the same data the method is illustrated using monthly rice price data for postindependence bangladesh including the very substantial regional price shocks during the 1974 famine impediments to market integration are indicated

spatial market integration in the presence of threshold effects a large body of research has evaluated price linkages in spatially separate markets much recent research has applied models appropriate for nonstationary data such analyses have been criticized for their ignorance of transactions costs which may inhibit price adjustments and thus affect tests of integration this analysis utilizes threshold autoregression and cointegration models to account for a neutral band representing transactions costs we evaluate daily price linkages among four corn and four soybean markets in north carolina nonlinear impulse response functions are used to investigate dynamic patterns of adjustments to shocks our results confirm the presence of thresholds and indicate strong support for market integration though adjustments following shocks may take many days to be complete in every case the threshold models suggest much faster adjustments in response to deviations from equilibrium than is the case when threshold behavior is ignored a large amount of empirical research has evaluated the extent to which spatially separate markets are integrated though the term is used loosely in the literature tests of market integration usually consider the extent to which shocks are transmitted among spatially separate markets the integration of markets can have important implications for price discovery and the operation of the market since persistent deviations from integration may imply riskless profit opportunities for spatial traders