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Wheat inputs and the law of one price

Author

Listed:
  • Colin A. Carter

    (Department of Agricultural Economics, Univesity of California, Davis)

  • Neil A. Hamilton

    (Manitoba Department of Agriculture in Winnipeg)

Abstract

This article tests the law of one price for wheat inputs tradeable between Canada and the United States. If Canadian and US input prices fail to equilibrate with exchange rate changes, the country which experiences a decrease in relative costs will have a competitive advantage. The results show that Canadian input prices did not increase as rapidly as US prices between 1977-86 and this suggests that, ceteris paribus, Canadian wheat producers were made relatively better off.

Suggested Citation

  • Colin A. Carter & Neil A. Hamilton, 1989. "Wheat inputs and the law of one price," Agribusiness, John Wiley & Sons, Ltd., vol. 5(5), pages 489-496.
    • Handle: RePEc:wly:agribz:v:5:y:1989:i:5:p:489-496
    DOI: 10.1002/1520-6297(198909)5:5<489::AID-AGR2720050507>3.0.CO;2-R
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    References listed on IDEAS

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    1. Irving B. Kravis & Robert E. Lipsey, 1971. "Price Competitiveness in World Trade," NBER Books, National Bureau of Economic Research, Inc, number krav71-1.
    2. Kost, William E., 1976. "Effects Of An Exchange Rate Change On Agricultural Trade," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 28(3), pages 1-8, July.
    3. Amalia Vellianitis-Fidas, 1975. "The Exchange Rate and U.S. Agriculture: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(4), pages 692-695.
    4. Chambers, Robert G. & Just, Richard E., 1982. "An investigation of the effect of monetary factors on agriculture," Journal of Monetary Economics, Elsevier, vol. 9(2), pages 235-247.
    5. G. Edward Schuh, 1974. "The Exchange Rate and U. S. Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 1-13.
    6. Genberg, Hans, 1977. "The concept and measurement of the world price level and rate of inflation," Journal of Monetary Economics, Elsevier, vol. 3(2), pages 231-252, April.
    7. Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, vol. 67(5), pages 942-948, December.
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    Cited by:

    1. Richard J. Sexton & Catherine L. Kling & Hoy F. Carman, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 568-580.
    2. Shengfei Han & Pei He, 2012. "Reforms, WTO, arbitrage efficiency and integration between the China‐US soybean markets," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 4(3), pages 318-341, August.
    3. Mohanty, Samarendu & Peterson, E. Wesley F. & Smith, Darnell B., 1998. "Fractional Cointegration and the False Rejection of the Law of One Price in International Commodity Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 30(2), pages 267-276, December.
    4. Fan, Xiaoli & Gómez, Miguel I. & Atallah, Shady S. & Hernandez, Juan, 2014. "Examining Seasonality of Spatial Efficiency in the U.S. Fresh Broccoli Market," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170235, Agricultural and Applied Economics Association.
    5. Mohanty, Samarendu & Peterson, E. Wesley F. & Smith, Darnell B., 1998. "Price Integration In Mercosur Countries: A Fractional Cointegration Analysis," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20954, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Vollrath, Thomas L., 2003. "North American Agricultural Market Integration And Its Impact On The Food And Fiber System," Agricultural Information Bulletins 33639, United States Department of Agriculture, Economic Research Service.
    7. Xu, Miao & Orden, David, 2002. "Exchange Rate Effects On Canadian/U.S. Agricultural Prices," 2002 Annual meeting, July 28-31, Long Beach, CA 19886, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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