Price disparity in international commodity markets: the case of Malaysian key exports

Citation

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).

Abstract

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.

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Additional Metadata

Item Type:	Conference or Workshop Item (Paper)
Divisions:	Faculty of Economics and Management
Publisher:	Universiti Putra Malaysia
Keywords:	Pass-through problem; Agricultural exports; Exchange rates; Law of one price
Depositing User:	Azhar Abdul Rahman
Date Deposited:	16 May 2016 08:00
Last Modified:	16 May 2016 08:00
URI:	http://psasir.upm.edu.my/id/eprint/47457
Statistic Details:	View Download Statistic

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