Journal
JOURNAL OF THE ASIA PACIFIC ECONOMY
Volume 17, Issue 1, Pages 113-126Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/13547860.2012.640010
Keywords
world market; Bangladeshi market; rice prices; market integration
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The article examines the dynamic relationship between the world and the domestic market price of rice for Bangladesh given agricultural trade liberalization. A Johansen multivariate cointegration test was used, followed by an error correction model. Results show that there exists a long-run unidirectional equilibrium relationship, meaning that the domestic prices adjust to the world prices but not vice versa. Our results highlight the dependence of the Bangladeshi rice market on the world rice market and underline the need for adequate policies which specifically address the issue of food security when world prices are very high. The goal of such policies should be to dampen or reduce domestic price volatility induced by the world market.
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