Market integration analysis may be helpful in providing a photograpy of the operation of local markets at a given point in time. Unless it is extended to examine, among others, how market integration affects the process of adjustment in local markets, integration analysis will be of limited help as a tool for market policy research. The approach outlined in the present paper proposes an extension that is based on two premises. First, that the impact of the shock in the central market prices does not only affect the short term level of the local prices, but also their time path. That second, long term impact is determined by the degree of integration and is affected by any accompanying changes in local arbitrage costs.
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