Food price convergence in Canada: A nonparametric nonlinear cointegration analysis

Abstract

Canada has paid great efforts to reduce interprovincial trade barriers in order to establish an integrated local economy. In order to assess the cross-border movements of goods across provinces and territories, this paper examines the price index convergence of food products within Canada from 1997 to 2016. Since the cointegrating relationship between food product prices may not be exact or linear, we adopt the rank tests for analysis which do not require prior knowledge and specification of the linear or nonlinear functional form. Our results validate the price convergence of all food products under study within Canada and show that government initiatives are effective. Furthermore, a subset of the cointegration relationships exhibits nonlinear long-run price co-movements.