Domestic Market Integration and the Law of One Price in Brazil

Carlos Góes and Troy Matheson ()

No 2015/213, IMF Working Papers from International Monetary Fund

Abstract: This paper presents the first assessment domestic market integration in Brazil using the law of one price. The law of one price is tested using two panel unit root methodologies and a unique data set comprising price indices for 51 products across 11 metro-areas. We find that the law of one price holds for most tradable products and, not surprisingly, non-tradable products are found to be less likely to satisfy the law of one price. While these findings are consistent with evidence found for other countries, price convergence occurs very slowly in Brazil, suggesting relatively limited domestic market integration.

Keywords: WP; null hypothesis; Law of One Price; Panel Cointegration; Domestic Market Integration; LLC framework; market integration; price convergence; price deviation; product price; ADF coefficient; Price indexes (search for similar items in EconPapers)
Pages: 11
Date: 2015-09-29
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Citations: View citations in EconPapers (4)

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Journal Article: Domestic market integration and the law of one price in Brazil (2017)
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