Testing for the law of one price: rice market integration in Bangladesh

P. J. Dawson and P. K. Dey
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P. J. Dawson: University of Newcastle upon Tyne, Newcastle upon Tyne, UK, Postal: University of Newcastle upon Tyne, Newcastle upon Tyne, UK
P. K. Dey: Bangladesh Rice Research Institute, Gazipur, Bangladesh, Postal: Bangladesh Rice Research Institute, Gazipur, Bangladesh

Journal of International Development, 2002, vol. 14, issue 4, 473-484

Abstract: Recent studies of spatial market integration have adopted error correction models to test for its existence and for market dominance. An integrated empirical framework is proposed here which tests for long-run spatial market integration between price pairs using a dynamic vector autoregressive model and cointegration. Hypotheses tests of market integration, perfect market integration, and causality are conducted sequentially. The approach is illustrated using monthly prices from rice markets in Bangladesh since trade liberalisation in 1992. Results show that rice markets are perfectly integrated and that Dhaka dominates near markets but is dominated by more distant markets. Copyright © 2002 John Wiley & Sons, Ltd.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:14:y:2002:i:4:p:473-484

DOI: 10.1002/jid.888

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