Only few models exist which allow for a regime-dependent spatial price equilibrium. This paper focuses on the price insulating effects of export restrictions. The theory of a Walrasian equilibrium and the spatial price equilibrium theory suggest that export restrictions lead to multiple spatial equilibria between the domestic and the world market price. Our analysis is unique in testing for linear versus non-linear cointegration within a smooth transition cointegration model. The application to the wheat export quota in Ukraine shows that the domestic wheat price was stabilized about 30% below the international wheat price during the two recent price booms. We trace back the increased speed of adjustment in the closed trade regime to increased price information flows and heightened information attention when prices are volatile and high. From a global point of view, the domestic wheat price in Ukraine would have increased to the same degree, if no country had engaged in price insulating behaviour 2006-2008 worldwide.


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