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Tests For Market Integration And The Law Of One Price: The Market For Whitefish In France

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  • Asche, Frank
  • Gordon, Daniel V.
  • Hannesson, Rognvaldur

Abstract

This paper examines the relationship between causality models and cointegration models in testing for price integration and the Law of One Price (LOP). In our review, we show that cointegration models, which allow for nonstationarity in prices, are a natural extension of the traditional causality methods and not an alternative approach. Hence, the two approaches investigate the same economic hypotheses; however, the choice of modeling method depends on the time series properties of the data. An empirical analysis is provided using prices from the whitefish market in France. With nonstationary price data, the causality approach over rejects the hypothesis of the LOP, whereas conintegration models provide evidence for a well-integrated whitefish market. A generalized version of the composite commodity theorem holds, and prices of most whitefish species can be aggregated into a single commodity price index.

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File URL: http://purl.umn.edu/28114
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Bibliographic Info

Article provided by Marine Resources Foundation in its journal Marine Resource Economics.

Volume (Year): 19 (2004)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:ags:mareec:28114

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Web page: http://www.uri.edu/cels/enre/mre/mre.htm

Related research

Keywords: Resource /Energy Economics and Policy;

References

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  1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  2. Richardson, J. David, 1978. "Some empirical evidence on commodity arbitrage and the law of one price," Journal of International Economics, Elsevier, vol. 8(2), pages 341-351, May.
  3. Gordon, D.V., 1994. "Optimal Lag Length in Estimating Dickey-Fuller Statistics: An Empirical Note," Papers 9405, Calgary - Department of Economics.
  4. Lewbel, Arthur, 1996. "Aggregation without Separability: A Generalized Composite Commodity Theorem," American Economic Review, American Economic Association, vol. 86(3), pages 524-43, June.
  5. Hall, S G, 1986. "An Application of the Granger & Engle Two-Step Estimation Procedure to United Kingdom Aggregate Wage Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 229-39, August.
  6. George J. Stigler & Robert A. Sherwin, 1983. "The Extent of the Market," University of Chicago - George G. Stigler Center for Study of Economy and State 31, Chicago - Center for Study of Economy and State.
  7. Shabbar Jaffry & Sean Pascoe & Catherine Robinson, 1999. "Long run price flexibilities for high valued UK fish species: a cointegration systems approach," Applied Economics, Taylor and Francis Journals, vol. 31(4), pages 473-481.
  8. Gordon, Daniel V. & Hannesson, Rognvaldur, 1996. "On Prices Of Fresh And Frozen Cod Fish In European And U.S. Markets," Marine Resource Economics, Marine Resources Foundation, vol. 11(4).
  9. Frank Asche & Ola Flaaten & John R. Isaksen & Terje Vassdal, 2002. "Derived Demand and Relationships between Prices at Different Levels in the Value Chain: A Note," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(1), pages 101-107.
  10. Gordon, Daniel V. & Salvanes, Kjell Gunnar & Atkins, Frank, 1993. "A Fish Is a Fish Is a Fish? Testing for Market Linkages on the Paris Fish Market," Marine Resource Economics, Marine Resources Foundation, vol. 8(4).
  11. Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, vol. 67(5), pages 942-48, December.
  12. Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-26, February.
  13. D. V. Gordon & J. E. Hobbs & W. A. Kerr, 1993. "A Test For Price Integration In The Ec Lamb Market," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(1), pages 126-134.
  14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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Citations

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Cited by:
  1. Vinuya, Ferdinand D., 2006. "Testing for Market Integration and the Law of One Price in World Shrimp Markets," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35351, Southern Agricultural Economics Association.
  2. Petersen, Elizabeth H. & Muldoon, Geoffrey, 2006. "Wholesale and retail price integration in the live reef food fish trade," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139891, Australian Agricultural and Resource Economics Society.
  3. Asche, Frank & Roll, Kristin H & Trollvik, Trine, 2009. "New aquaculture species. Entering the whitefish market," UiS Working Papers in Economics and Finance 2009/21, University of Stavanger.
  4. Norman-Lopez, Ana & Asche, Frank, 2008. "Competition Between Imported Tilapia and US Catfish in the US Market," Marine Resource Economics, Marine Resources Foundation, vol. 23(2).
  5. Kentaka Aruga & Shunsuke Managi, 2011. "Tests on price linkage between the U.S. and Japanese gold and silver futures markets," Economics Bulletin, AccessEcon, vol. 31(2), pages 1038-1046.
  6. Aruga, Kentaka & Managi, Shunsuke, 2011. "Testing the international linkage in the platinum-group metal futures markets," Resources Policy, Elsevier, vol. 36(4), pages 339-345.
  7. Frank Asche & Rui Menezes & Joaõ Dias, 2007. "Price transmission in cross boundary supply chains," Empirica, Springer, vol. 34(5), pages 477-489, December.
  8. Ramòn Jiménez-Toribio & Patrice Guillotreau & Rémi Mongruel, 2009. "Global integration of European tuna markets," Working Papers hal-00430014, HAL.
  9. Suwen Pan & Cheng Fang & Roderick Rejesus, 2009. "Food Calorie Intake under Grain Price Uncertainty in Rural Nepal," Journal of Family and Economic Issues, Springer, vol. 30(2), pages 137-148, June.
  10. Guttormsen, Atle G. & Roll, Kristin H., 2011. "Technical Efficiency in a Heterogeneous Fishery: The Case of Norwegian Groundfish Fisheries," Marine Resource Economics, Marine Resources Foundation, vol. 26(4).
  11. Nielsen, Max & Setala, Jari & Laitinen, Jukka & Saarni, Kaija & Virtanen, Jarno & Honkanen, Asmo, 2007. "Market Integration of Farmed Trout in Germany," Marine Resource Economics, Marine Resources Foundation, vol. 22(2).
  12. Pan, Suwen & Fang, Cheng & Rejesus, Roderick M., 2008. "Food Calorie Intake under Grain Price Uncertainty: Evidence from Rural Nepal," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6198, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Guillotreau, Patrice & Jiménez-Toribio, Ramón, 2011. "The price effect of expanding fish auction markets," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 211-225, August.
  14. Oglend, Atle & Sikveland, Marius, 2008. "The Behaviour of Salmon Price Volatility," Marine Resource Economics, Marine Resources Foundation, vol. 23(4).
  15. Asche, Frank & Dahl, Roy Endre & Gordon, Daniel V. & Trollvik, Trine & Aandahl, Paul, 2011. "Demand Growth for Atlantic Salmon: The EU and French Markets," Marine Resource Economics, Marine Resources Foundation, vol. 26(4).

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