Estimating the degree of market integration

Fackler P. L., TAŞTAN H.

AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS, vol.90, no.1, pp.69-85, 2008 (SCI-Expanded) identifier identifier

  • Publication Type: Article / Article
  • Volume: 90 Issue: 1
  • Publication Date: 2008
  • Doi Number: 10.1111/j.1467-8276.2007.01058.x
  • Journal Name: AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.69-85
  • Keywords: indirect inference, market integration, price analysis, ARBITRAGE COST APPROACH, WORLD SALMON MARKETS, TIME-SERIES MODELS, ONE PRICE, PRODUCT AGGREGATION, TRANSACTION COSTS, GOLD STANDARD, UNITED-STATES, LAW, COINTEGRATION
  • Yıldız Technical University Affiliated: Yes

Abstract

Existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination. This article proposes new measures of market integration defined directly in terms of a well-known spatial price determination model and develops an econometric methodology for estimating these measures. Due to the intractability of the conditional density function of prices, we use indirect inference to estimate the model parameters and market integration measures. The methodology is illustrated with simulated data and is applied to soybean price data for the United States, Brazil, and the EU.