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Spatial Product Market Integration between Two Small, Open Neighbouring Economies
Author(s) -
Bakucs Zoltán,
Bojnec Štefan,
Fertő Imre
Publication year - 2014
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.21399
Subject(s) - economics , market integration , law of one price , order (exchange) , product (mathematics) , econometrics , price level , mid price , microeconomics , monetary economics , geometry , mathematics , finance
This paper contributes with an in‐depth investigation of spatial wheat producer market integration between two neighboring countries, net exporting Hungary and net importing Slovenia. One of the key features of this spatial producer price transmission is the very important role Hungary plays in supplying wheat to Slovenia. Using monthly data from January 2000 to April 2011, spatial price transmission is analyzed from a number of perspectives, using a wealth of econometric techniques in order to shed light upon the degree of integration, adjustment asymmetries and the role of market share upon price transmission. Empirical results rejected the validity of the Law of One Price, identified Hungary as the price‐leading market, confirmed competitive symmetric price adjustment, and emphasized the role of Hungarian market share in total Slovenian imports with respect to wheat price transmission elasticity. The results imply that wheat producer prices in both of the analyzed countries tend to be internationally determined. Hungarian exports are unable to price discriminate in wheat trade between the two neighboring markets.