Price Convergence and Market Integration in Russia
Institute of Economics and Industrial Engineering, Siberian Branch of the Russian Academy of Sciences; Department of Economics, Novosibirsk State University
September 15, 2010
William Davidson Institute Working Paper No. 999
After a period of growing disconnectedness of regional markets following the 1992 price liberalization in Russia, a process of improvement in market integration started since about 1994. This paper analyzes the spatial pattern of goods market integration in the country in 1994-2000, characterizing Russian regions into three states: integrated with a benchmark region, not integrated but tending toward integration with it, and not integrated and not tending toward integration. The standard AR(1) model serves to test for market integration. To capture a movement toward integration (price convergence), a nonlinear time series model with an asymptotically decaying trend is proposed. The results obtained suggest that only a bit more than one fifth of the Russian regions can be deemed not integrated and not tending toward integration with the benchmark region over 1994-2000.
Number of Pages in PDF File: 45
Keywords: Law of one price, Price dispersion, Non-linear trend, Russian regions.
JEL Classification: C32, P22, R10, R15working papers series
Date posted: December 18, 2010
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