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Testing the law of one price in gram, mash and masoor markets of Pakistan

Hussain, Babar and Fahim, Muhammad Amir and Sajid, Muhammad (2011): Testing the law of one price in gram, mash and masoor markets of Pakistan.

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Abstract

This study examines the market integration of three pulses explicitly known as gram, masoor and mash in Pakistan. The study develops a critical estimation of market integration in pulses market of Pakistan. Market integration provides valuable information about the dynamics of market adjustment and has implications for a sustainable agriculture development. The government intervention might be justified by market integration as this phenomenon raises a question whether there are present market imperfections. This study used the monthly wholesale price (Rs. /40kg) data from January 1991 to September 2010 of gram, mash and masoor in logarithmic form and empirically estimated the degree of integration in the markets of the three pulses. The study is employing an econometric technique of co-integration analysis. Co-integration results show that all gram, masoor and mash 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 pulses 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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