| Sumario: | This research investigates the spatial
market integration of the Chilean wheat
market in relation with its most representative
international markets by using a vector error
correction model (VECM) and how a price
support policy, as a price band, affect it. The
international market was characterized by two
relevant wheat prices: PAN from Argentina and
Hard Red Winter from the United States. The
spatial market integration level, expressed
in the error correction term (ECT), allowed
concluding that there is a high integration
degree among these markets with a variable
influence of the price band mechanism mainly
related with its estimation methodology.
Moreover, this paper showed that Chile can
be seen as price taker as long as the speed
of its adjustment to international shocks, being
these reactions faster than in the United States
and Argentina. Finally, the results validated
the "Law of the One Price", which assumes
price equalization across all local markets in
the long run.
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