Food price convergence and trade in the Balkans

In this paper, we test whether relative purchasing power parity holds for ten countries in the Balkans region. We chose to investigate food price indices because food consumed in the region is homogeneous, and food is, in general, a highly tradable good. As our results indicate slow convergence even after we control for various socioeconomic factors, we believe that nontariff barriers to trade remain the main cause of slow convergence. Our findings, to some extent, explain relatively low trade volume among the countries of the region, despite their continuous attempt to liberalize trade.