Some Further Evidence on the Law of One Price: The Law of One Price Still Holds

John Baffes ()

American Journal of Agricultural Economics, 1991, vol. 73, issue 4, 1264-1273

Abstract: International trade models often postulate the existence of a representative price, i.e., the price which prevails at all markets. This is known as the "Law of One Price." In this paper, the law of one price is tested for seven commodities among four countries by explicitly considering transaction costs. The empirical evidence suggests that, in most cases, the law of one price cannot be rejected asa maintained hypothesis. Furthermore, for the remaining cases transaction costs seem to cause the failure.

Date: 1991
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:73:y:1991:i:4:p:1264-1273.

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