Bayesian threshold adjustment in spatially integrated wheat markets in Russia

This paper studies spatial price transmission and integration of regional domestic wheat markets in Russia. An innovative approach to threshold estimation is applied to better capture model non-linearities associated with transaction costs and policy measures. The results show critical importance of distance that determines the speed at which price shocks are transmitted between the regional markets. Additionally, it is shown that the export ban for wheat in 2010/11 led to trade activation and faster price transmission inside the country. The effect of export ban was found to be enhanced by transport subsidies introduced to facilitate the distribution of grain in the wake of severe drought in certain production areas