Ahmad Zubaidi Baharumshah and Muzafar Shah Habibullah
Pertanika Journal of Social Science and Humanities, Volume 3, Issue 2, September 1995
Keywords: Pass-through problem, agricultural products, exchange rates, law o f one price
Published on:
Trade theory often postulates the existence of a representative price, that is, a single price that prevails in all markets. This is known as the Law of One Price (LOP). In this paper the empirical validity of LOP was tested using the recently developed co-integration method for timber exports. Monthly data for the period January 1985 to December 1992 were used to analyse the long-run equilibrium relationship. Empirically, we found the exchange rate pass-through on the exports to be complete for all timber products and markets. The results obtained suggest that the data are consistent with the LOP as a long-run relationship. We conclude that the markets for tropical forest products are generally competitive.
ISSN 0128-7702
e-ISSN 2231-8534
Recent Articles