Empirically testing the law of one price in an international commodity market: A rational expectations application to the natural rubber market
The Law of One Price (LOP) is an important ingredient in theories of international trade and exchange rate determination. An important shortcoming of the existing empirical literature is that parity is typically assumed to hold contemporaneously. This overlooks the fact that international commodity arbitrage takes place over tim~> <<8 well as across spatially separated markets. Recognizing this fact, we expect to see parity holding for expected prices. A model which incorporates the expectations of commodity arbitragers is constructed and used to test the LOP in the natural rubber market. Results indicate that the inclusion of expectations may be of value when considering the LOP.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- 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.
- Hooper, Peter & Kohlhagen, Steven W., 1978. "The effect of exchange rate uncertainty on the prices and volume of international trade," Journal of International Economics, Elsevier, vol. 8(4), pages 483-511, November.
- Crouhy-veyrac, Liliane & Crouhy, Michel & Melitz, Jacques, 1982. "More about the law of one price," European Economic Review, Elsevier, vol. 18(2), pages 325-344.
- Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
- Kravis, Irving B. & Lipsey, Robert E., 1978.
"Price behavior in the light of balance of payments theories,"
Journal of International Economics,
Elsevier, vol. 8(2), pages 193-246, May.
- Irving B. Kravis & Robert E. Lipsey, 1977. "Price Behavior in the Light of Balance of Payments Theories," NBER Working Papers 0181, National Bureau of Economic Research, Inc.
- A. Protopapadakis, Aris & R. Stoll, Hans, 1986. "The Law of One Price in international commodity markets: A reformulation and some formal tests," Journal of International Money and Finance, Elsevier, vol. 5(3), pages 335-360, September.
- Protopapadakis, Aris & Stoll, Hans R, 1983.
" Spot and Futures Prices and the Law of One Price,"
Journal of Finance,
American Finance Association, vol. 38(5), pages 1431-1455, December.
- Aris Protopapadakis & Hans R. Stoll, "undated". "Spot and Futures Prices and the Law of One Price," Rodney L. White Center for Financial Research Working Papers 17-82, Wharton School Rodney L. White Center for Financial Research.
- Nerlove, Marc & Grether, David M. & Carvalho, José L., 1979. "Analysis of Economic Time Series," Elsevier Monographs, Elsevier, edition 1, number 9780125157506 edited by Shell, Karl.
- Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, vol. 67(5), pages 942-948, December.
When requesting a correction, please mention this item's handle: RePEc:eee:agecon:v:4:y:1990:i:2:p:165-177. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.