Measuring Market Integration in the Presence of Threshold Effect: The Case of Bangladesh Rice Markets

Spatial price integration among five major Bangladesh rice markets is examined in the presence of threshold effects to account for the impact of transaction costs in the price adjustment process. Hansen and Seo (2002) threshold cointegration tests and threshold vector error correction models confirm the presence of threshold effects. Results highlight the importance of directing policy goals towards reducing transaction cost to engender greater pricing efficiency in Bangladesh rice markets.