Agricultural Prices of Pork at the Regional Level and the Law of One Price

Petra Bubáková

Acta Oeconomica Pragensia, 2012, vol. 2012, issue 1, 39-51

Abstract: Farmers earn their main income from selling agricultural commodities. Stability as well as the level of income are determined by the amount of production and market prices. Prices and price policies on the agricultural market could have a great impact on the success of programmes themselves. This paper focuses on research of relationships between prices at the regional level. The aim of this paper is to evaluate the relationship between prices at the regional level for selected regions of Bohemia and try to confirm that the Law of One Price is valid there. Agricultural prices for pork producers were used for the analysis. The data set has 157 observations in total. The first observation is from 27th June 2002 and the last observation is from 27th December 2008. No data have been published by the State Agricultural Intervention Fund since 2009. The investigated groups of regions are the Central Bohemian (CB), North-Eastern (N_E) and North-Western (N_W) regions of the Czech Republic. Econometric methods are used, and the primary tools for research are the ADF test, KPSS test, Johansen cointegration test and Vector Error Correction Model (VECM). On the basis of the VECM model, it was found that prices in the North-Eastern regions have an effect on prices in Central Bohemia. It was also discovered that prices in the Central Bohemian and North-Western regions have a mutual effect. The Law of One Price is valid with a high probability in the investigated regions. Prices in the long run are identical with a high probability. The results were elaborated as part of the research project MSM 6046070906 "Economics of resources of Czech agriculture and their efficient use in frame of multifunctional agri-food systems".

Keywords: Agricultural prices; pork; region; Law of One Price; cointegration; Vector Error Correction Model (search for similar items in EconPapers)
JEL-codes: C10 D40 Q10 (search for similar items in EconPapers)
Date: 2012
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DOI: 10.18267/j.aop.357

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