The Moscow Market in Country's Economic Space

This paper studies integration of the Moscow market for final goods with markets of all other Russian regions. It considers an aggregated market represented by a minimum food basket. The law of one price serves as a criterion of market integration. It is a base for constructing time series models of the regional costs of the staples basket over 2001–2015 relative to its cost in Moscow. Regional markets are divided into four groups: integrated with the Moscow market, conditionally integrated with it, not integrated but tending towards integration with the Moscow market, and neither integrated nor tending towards integration. Nonlinear time series models with asymptotically decaying trends describe the movement towards integration (price convergence)