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Assessing the Validity of the LOP in the EU Broiler Markets
Author(s) -
Emmanouilides Christos J.,
Fousekis Panos
Publication year - 2014
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.21386
Subject(s) - economics , econometrics , law of one price , macroeconomics , price level , mid price
ABSTRACT The objective of this article is to assess the validity of the Law of One Price (LOP) in five major EU broiler markets. This has been pursued using weekly price data from 1991 to 2012 and recent developments in econometric methodology that account simultaneously for nonstationarity, nonlinearity, and structural breaks. The empirical results provide strong evidence that the LOP holds, predominantly in its weak version. This implies that shocks are fully transmitted from one spatial market to the others, but price differences among them are likely to persist even in the long‐run.