Testing for adjustment costs and regime shifts in BRENT crude futures market

► Modelling BRENT crude spot and futures oil prices threshold vector error-correction (TVECM). ► Main question: is BRENT crude an integrated oil market in terms of threshold effects and adjustment costs? ► To answer this question need to reveal the dynamics of transaction costs from market imperfections. ► Main findings: the market follows a gradual integration path; two regimes are identified, a significant threshold exists. ► Adjustment costs in the error correction are present at the typical regime.