Abstract:
The liberalization of the agricultural sector in general and the rice
subsector in particular has been a major component of Bangladesh’s structural
adjustment program initiated in 1992. However, the government has continued
to intervene in the rice subsector. This paper examines whether the
regional/divisional rice markets have become spatially integrated following the
liberalization of the rice market. Wholesale weekly coarse rice prices at six
divisional levels over the period of January 2004 to November 2006 were used to
test the degree of market integration in Bangladesh using co-integration analysis
and a vector error correction model (VECM). The Johansen co-integration test
indicated that there are at least three co-integrating vectors implying that rice
markets in Bangladesh during the study period are moderately linked together
and therefore the long-run equilibrium is stable. The short-run market
integration as measured by the magnitude of market interdependence and the
speed of price transmission between the divisional markets has been weak.
