The Price-Level Convergence among Iranian Provinces

Since the information on the Iranian markets as a developing country are not complete and clear and market performance in different provinces of Iran is not unified and competitive, so the prices of goods in certain markets are not identical. The main purpose of this paper is to examine price-level convergence hypothesis and convergence speed among Iranian provinces over the period of 2007 through 2012 by adopting pair-wise approach which has been recently developed by Pesaran(2005). In this approach, the time series models (ADF, DF-GLS and KPSS unit root tests) have been applied. The empirical results indicate that according to the ADF and DF-GLS tests, the price convergence among the Iranian provinces have been poor and based on the KPSS test, in half of pair provinces, the price convergence have happened. Also, the average speed of convergence has been estimated around 1.8 months.