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

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Author Info
Asche, Frank
Gordon, Daniel V.
Hannesson, Rognvaldur

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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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Publisher 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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Keywords: Resource /Energy Economics and Policy;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  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. [Downloadable!] (restricted)
  3. James MacKinnon, 1990. "Critical Values for Cointegration Tests," University of California at San Diego, Economics Working Paper Series 90-4, Department of Economics, UC San Diego. [Downloadable!]
  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. [Downloadable!] (restricted)
  5. Jaffry, Shabbar A & Pascoe, Sean & Robinson, Catherine, 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 473-81, April. [Downloadable!] (restricted)
  6. 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, Blackwell Publishing, vol. 53(1), pages 101-107. [Downloadable!] (restricted)
  7. Stigler, George J & Sherwin, Robert A, 1985. "The Extent of the Market," Journal of Law & Economics, University of Chicago Press, vol. 28(3), pages 555-85, October.
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  8. 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. [Downloadable!] (restricted)
  9. 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. [Downloadable!] (restricted)
  10. D. V. Gordon & J. E. Hobbs & W. A. Kerr, 1993. "A Test For Price Integration In The Ec Lamb Market," Journal of Agricultural Economics, Blackwell Publishing, vol. 44(1), pages 126-134. [Downloadable!] (restricted)
  11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Frank Asche & Rui Menezes & Joaõ Dias, 2007. "Price transmission in cross boundary supply chains," Empirica, Springer, vol. 34(5), pages 477-489, December. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
  4. 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. [Downloadable!]
  5. 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). [Downloadable!]
  6. 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). [Downloadable!]
  7. Harrison Fell, 2008. "Rights-Based Management and Alaska Pollock Processors' Supply," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 90(3), pages 579-592, 08. [Downloadable!] (restricted)
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