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Spatial Price Integration in Nepal

Author

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  • Ram Sharan Kharel PhD

    ()

  • Tap Prasad Koirala PhD

    () (Nepal Rastra Bank)

Abstract

There is a large volume of literature documenting the analysis of spatial market integration based on individual commodity prices. This paper, instead, contributes to the literature by delineating the existence of spatial market integration using intra-regional price indices. In this context, we use monthly price indices for Kathmandu valley, Hill and the Terai region, which are the only available spatial indices in Nepal. Employing Johansens' bi-variate cointegrating approach for the period from August 1995 to December 2010, we found a strong proposition of Law of One Price (LOP) across the region indicating the fact that spatial markets are highly integrated albeit speed of adjustment is rather slow. This may be due to the existence of oligopolistic pricing behaviour, carteling, asymmetric market information, and syndicate in the transportation system as discussed in various literatures.

Suggested Citation

  • Ram Sharan Kharel PhD & Tap Prasad Koirala PhD, 2011. "Spatial Price Integration in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(1), pages 21-36, April.
  • Handle: RePEc:nrb:journl:v:23:y:2011:i:1:p:21-36
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    File URL: http://www.nrb.org.np/ecorev/pdffiles/vol23-1_art2.pdf
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    Cited by:

    1. Ram Sharan Kharel Ph.D., 2012. "Modelling and Forecasting Fiscal Policy and Economic Growth in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 24(1), pages 1-15, April.
    2. Ram Sharan Kharel Ph.D., 2012. "Modelling and Forecasting Fiscal Policy and Economic Growth in Nepal," NRB Working Paper 09/2012, Nepal Rastra Bank, Research Department.
    3. Lizano, Víctor Rodríguez & Vega, Mercedes Montero, 3. "Costa Rican Meat Value Chain Description: Price Transmission As A Tool," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 4(3).

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