Law of One Price in International Commodity Markets: A Fractional Cointegration Analysis
The Law of One Price (LOP) is an important component of most, if not all, international trade models because this assumption allows researchers to use a single representative price for all regions. This paper examines the long-run LOP for international commodity prices using a generalized notion of cointegration called fractional cointegration. This analysis is applied to nine pairs of price series, supporting the existence of LOP in eight cases.
Year of publication: |
1996-02
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Authors: | Mohanty, Samarendu ; Smith, Darnell B. ; Peterson, E. Wesley F. ; Meyers, William H. |
Institutions: | Center for Agricultural and Rural Development (CARD), Iowa State University |
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