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Testing the law of one price in gram markets of Pakistan

Hussain, Babar (2011): Testing the law of one price in gram markets of Pakistan.

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Abstract

Regional market integration in many agricultural commodities has been extensively studied for the insight, it provides in to the functioning of such markets; such studies provide valuable information about the dynamics of market adjustment, and whether there exist market imperfection, which may justify government intervention. This study used the monthly wholesale price (Rs. /40 kg) data from January 1991 to December 2006 of gram, in Logarithmic form and empirically estimated the degree of integration in gram markets of Pakistan using co integration analysis. Co-integration results show that all gram markets are highly Co-integrated in the Long run. The high degree of market integration observed in this case is consistent with the view that Pakistan’s gram markets are quite competitive and provide little justification for extensive and costly government intervention designed to improve competitiveness to enhance market efficiency.

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