The Law of One Price Over 700 Years
Kenneth Froot,
Michael Kim () and
Kenneth Rogoff
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Michael Kim: SunTrust
Annals of Economics and Finance, 2019, vol. 20, issue 1, 1-35
Abstract:
This paper examines annual commodity price data from England and Holland over a span of seven centuries. Our data incorporates transaction prices on seven commodities: barley, butter, cheese, oats, peas, silver, and wheat, as well as pound/shilling nominal exchange rates going back, in some cases, to 1273. We find that the magnitude, volatility, and persistence of deviations from the law of one price have not declined by as much as one might expect. We find this despite lower transport costs, reduced trade protection, and fewer wars and plagues in the modern era. Our analysis is consistent with growing evidence that goods-market arbitrage remains highly imperfect, even today.
Keywords: Purchasing power parity; Exchange rates (search for similar items in EconPapers)
JEL-codes: F3 F31 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)
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Related works:
Working Paper: The Law of One Price Over 700 Years (2001) 
Working Paper: The Law of One Price Over 700 Years (1995)
Working Paper: The Law of One Price Over 700 Years (1995) 
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2019:v:20:i:1:frootkimrogoff
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