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

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  • P. J. Dawson

    (University of Newcastle upon Tyne, Newcastle upon Tyne, UK)

  • P. K. Dey

    (Bangladesh Rice Research Institute, Gazipur, Bangladesh)

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    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.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 14 (2002)
    Issue (Month): 4 ()
    Pages: 473-484

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    Handle: RePEc:wly:jintdv:v:14:y:2002:i:4:p:473-484

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    Web page: http://www3.interscience.wiley.com/journal/5102/home

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    Cited by:
    1. Katengeza, Samson P., 2009. "Malawi Agricultural Commodity Exchange And Spatial Rice Market Integration," Research Theses, Collaborative Masters Program in Agricultural and Applied Economics 117804, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Rashid, Shahidur & Cummings, Ralph Jr. & Gulati, Ashok, 2005. "Grain marketing parastatals in Asia," MTID discussion papers, International Food Policy Research Institute (IFPRI) 80, International Food Policy Research Institute (IFPRI).
    3. Alam, Mohammad Jahangir & Begum, Ismat Ara, 2012. "World and Bangladesh Rice Market Integration: An Application of Threshold Cointegration and Threshold Vector Error Correction Model (TVECM)," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK, Agricultural Economics Society 135119, Agricultural Economics Society.
    4. Marks, Daan, 2010. "Unity or diversity? On the integration and efficiency of rice markets in Indonesia, c. 1920-2006," Explorations in Economic History, Elsevier, Elsevier, vol. 47(3), pages 310-324, July.
    5. Le Dang Trung & Tran Ngo Minh Tam & Bob Baulch & Henrik Hansen, 2007. "Testing for Food market integration: A study of the Vietnamese paddy market," Working Papers 11, Development and Policies Research Center (DEPOCEN), Vietnam.
    6. Kadir Eryigit & Suleyman Karaman, 2011. "Testing for spatial market integration and law of one price in Turkish wheat markets," Quality & Quantity: International Journal of Methodology, Springer, Springer, vol. 45(6), pages 1519-1530, October.
    7. Katengeza, Samson P. & Mangisoni, Julius H. & Okello, Julius Juma, 2010. "The Role of ICT-based Market Information Services in Spatial Food Market Integration: The Case of Malawi Agricultural Commodity Exchange," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Afri 96170, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    8. Tahir Mukhtar & Muhammad Tariq Javed, 2007. "Price Integration in Wholesale Maize Markets in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 46(4), pages 1075-1084.
    9. Muhammad Sarwar Zahid & Abdul Qayyum & Wasim Shahid Malik, 2007. "Dynamics of Wheat Market Integration in Northern Punjab, Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 46(4), pages 817-830.
    10. Alam, Mohammad Jahangir & McKenzie, Andrew M. & Buysse, Jeroen & Begum, Ismat Ara & Wailes, Eric J. & Van Huylenbroeck, Guido, 2012. "Measuring Market Integration in the Presence of Threshold Effect: The Case of Bangladesh Rice Markets," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124435, Agricultural and Applied Economics Association.
    11. Chowdhury, Nuimuddin & Farid, Nasir & Roy, Devesh, 2006. "Food policy liberalization in Bangladesh: how the government and the markets delivered," MTID discussion papers, International Food Policy Research Institute (IFPRI) 92, International Food Policy Research Institute (IFPRI).
    12. Yavapolkul, Navin & Gopinath, Munisamy & Gulati, Ashok, 2004. "Post-Uruguay Round price linkages between developed and developing countries," MTID discussion papers, International Food Policy Research Institute (IFPRI) 76, International Food Policy Research Institute (IFPRI).
    13. Robertson, Raymond, 2004. "Defining North American Economic Integration," 2004 NAAMIC Workshop I: North American Agrifood Market Integration: Current Situtation and Perspectives, North American Agrifood Market Integration Consortium (NAAMIC) 163856, North American Agrifood Market Integration Consortium (NAAMIC).

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