Price disparity in international commodity markets: the case of Malaysian key exports
According to the law of one price (LOP), the export price of a well defined commodity should be the same in different markets. This paper investigates the empirical validity of this hypothesis using cointegration technique suggested by Engle and Granger (1985) and Johansen (1988). Monthly data on t...
| Main Authors: | , |
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| Format: | Conference or Workshop Item |
| Language: | English |
| Published: |
Universiti Putra Malaysia
1994
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| Online Access: | http://psasir.upm.edu.my/id/eprint/47457/1/Price%20disparity%20in%20international%20commodity%20markets%20the%20case%20of%20Malaysian%20key%20exports.pdf |
| _version_ | 1796974792725757952 |
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| author | Baharumshah, Ahmad Zubaidi Habibullah, Muzafar Shah |
| author_facet | Baharumshah, Ahmad Zubaidi Habibullah, Muzafar Shah |
| author_sort | Baharumshah, Ahmad Zubaidi |
| collection | UPM |
| description | According to the law of one price (LOP), the export price of a well defined commodity should be the same in different markets. This paper investigates the empirical validity of
this hypothesis using cointegration technique suggested by Engle and Granger (1985) and Johansen (1988). Monthly data on the export prices of rubber, palm oil and timber
products were used to analyze the long-run equilibrium relationship. Both the residual based tests and the maximum likelihood procedures produced results that are not supportive of the LOP as a long-run relationship. We conclude that the exchange rate pass-through on the export prices to be incomplete and international markets are not
competitive. |
| first_indexed | 2024-03-06T09:02:09Z |
| format | Conference or Workshop Item |
| id | upm.eprints-47457 |
| institution | Universiti Putra Malaysia |
| language | English |
| last_indexed | 2024-03-06T09:02:09Z |
| publishDate | 1994 |
| publisher | Universiti Putra Malaysia |
| record_format | dspace |
| spelling | upm.eprints-474572016-05-16T08:00:12Z http://psasir.upm.edu.my/id/eprint/47457/ Price disparity in international commodity markets: the case of Malaysian key exports Baharumshah, Ahmad Zubaidi Habibullah, Muzafar Shah According to the law of one price (LOP), the export price of a well defined commodity should be the same in different markets. This paper investigates the empirical validity of this hypothesis using cointegration technique suggested by Engle and Granger (1985) and Johansen (1988). Monthly data on the export prices of rubber, palm oil and timber products were used to analyze the long-run equilibrium relationship. Both the residual based tests and the maximum likelihood procedures produced results that are not supportive of the LOP as a long-run relationship. We conclude that the exchange rate pass-through on the export prices to be incomplete and international markets are not competitive. Universiti Putra Malaysia 1994 Conference or Workshop Item PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/47457/1/Price%20disparity%20in%20international%20commodity%20markets%20the%20case%20of%20Malaysian%20key%20exports.pdf Baharumshah, Ahmad Zubaidi and Habibullah, Muzafar Shah (1994) Price disparity in international commodity markets: the case of Malaysian key exports. In: Proceedings of the Seminar of Economics and Management, 18-19 Oct. 1994, Port Dickson, Malaysia. (pp. 1-20). |
| spellingShingle | Baharumshah, Ahmad Zubaidi Habibullah, Muzafar Shah Price disparity in international commodity markets: the case of Malaysian key exports |
| title | Price disparity in international commodity markets: the case of Malaysian key exports |
| title_full | Price disparity in international commodity markets: the case of Malaysian key exports |
| title_fullStr | Price disparity in international commodity markets: the case of Malaysian key exports |
| title_full_unstemmed | Price disparity in international commodity markets: the case of Malaysian key exports |
| title_short | Price disparity in international commodity markets: the case of Malaysian key exports |
| title_sort | price disparity in international commodity markets the case of malaysian key exports |
| url | http://psasir.upm.edu.my/id/eprint/47457/1/Price%20disparity%20in%20international%20commodity%20markets%20the%20case%20of%20Malaysian%20key%20exports.pdf |
| work_keys_str_mv | AT baharumshahahmadzubaidi pricedisparityininternationalcommoditymarketsthecaseofmalaysiankeyexports AT habibullahmuzafarshah pricedisparityininternationalcommoditymarketsthecaseofmalaysiankeyexports |