The Law of One Price and the Czech Cereal Market Integration into the EU Common Agricultural Market

The Czech cereal market integration into the common agricultural market (EU) between 1993 - 2010 is studied using monthly price data for wheat and barley in Belgium, Germany, Austria and the Czech Republic. Stability in the law of one price (LOP) equation is studied through multiple structural breaks within the equation. Results indicate that the integration of the Czech Republic into EU cereal markets is more unstable than that of Austria (a fourth enlargement country), although there is empirical support for the LOP when structural breaks are taken into account. Structural change also occurred in the old EU LOP equation between Belgium and Germany.