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The law of one price: a test based on prices for selected inputs in New Zealand agriculture
Author(s) -
Delpachitra S.B.,
Hill R.L. St
Publication year - 1994
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/j.1574-0862.1994.tb00310.x
Subject(s) - economics , foundation (evidence) , agriculture , law of one price , econometrics , test (biology) , loop (graph theory) , price level , microeconomics , macroeconomics , law , mid price , mathematics , ecology , paleontology , political science , biology , combinatorics
Abstract The law of one price (LOOP) is an essential foundation of both the pure theory of trade and monetary theory. Strictly speaking, the law relates to prices of individual commodities. However, empirical tests of LOOP have often relied on aggregated data. In this paper, a model is derived and estimated using price data for 15 selected inputs in New Zealand agriculture. The results offer no support for the LOOP in the short run, and the results for the long run are mixed. It may be inappropriate, therefore, to assume that the LOOP holds generally in modelling exercises, particularly when models are used for policy purposes.