DOES THE LAW OF ONE PRICE (LOP) HOLDS IN THE INTERNATIONAL BARLEY MARKETS

Sanusi Mohammed Sadiq, P I Singh, M M Ahmad
  AGRISE,Vol 21, No 4 (2021),  251-266  
Viewed : 141 times

Abstract


A price time-series data of barley for a period of 49 years (1970-2019) sourced from the FAO database was used to determine the horizontal market integration of barley among some selected major market players in barley trade in the world. The chosen markets are Australia, Canada, Iran, Turkey and the USA based on the availability of up-to-date large span data. The collected data were analyzed using inferential statistics- unit root tests, co-integration tests, unrestricted vector autoregressive model, Granger causality test and impulse response function. The empirical evidence showed that the law of one price (LOP) exists among the selected markets i.e. there is perfect price communication among the markets in the long run, thus highly integrated. Besides, Australian and Canadian markets established a long-run equilibrium, thus have a stable price in the long run. Furthermore, the import and export hubs of barley in the trade are Canadian, USA and Turkey markets while Iranian and Australian markets are large consumer markets. The empirical evidence showed Canadian and USA markets to be the major players in the trade while the Australian market is a follower in the trade. All the selected markets have promising future prices with a little inflationary trend which will owe to supply fluctuation. The reinforcement of physical infrastructure, the use of ICTs and well-defined consistent agricultural policy/market initiatives would thus lead to the global creation of a single uniform economic market for barley.


Keywords


Barley; international; markets; LOP; spatial

Full Text:

PDF

References


Ahmed, M. and Singla, N.(2017).Market integration and price transmission in major onion markets of India. Economic Affairs, 62(3):405-417

Ardeni, P.G.(1989). Does the law of one price really hold for commodity prices? American Journal of Agricultural Economics, 71(3), 661

Barrett, C.B. and Li, J.(2002). Distinguishing between equilibrium and integration in spatial price analysis. American Journal of Agricultural Economics, 84:292-307.

Barrett, C.B.(2008).Spatial Market Integration. The New Palgrave Dictionary of Economics, Second Ed. London: Palgrave Macmillan.

Beag, F.A. and Singla, N.(2014).Cointegration, causality and impulse response analysis in major Apple markets of India. Agricultural Economics Research Review, 27(2):289-298.

Chengappa, P.G., Manjunatha, A.V., Vikas, D. and Khalil, S.(2012).Competitive assessment of onion markets in India. Institute for Social and Economic Change. Competition Commission of India, Pp. 1-86.

Engle, R.F., and Granger, C.W.J.(1987).Co-integration and error correction: representation, estimation and testing. Econometrica, 55:251-276

Granger, C.W.J.(1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 37(1):424-438.

Johansen, S.(1988).Statistical analysis of co-integration vectors. Journal of Economic Dynamics and Control, 12(2-3):231-254

Larre, G.A.(2019). Market integration in the international market of soybeans: are GM soy and non-GM soy markets integrated? Journal of Agricultural Science, 11(15):14-22

Listorti, G. and Esposti, R.(2012).Horizontal price transmission in agricultural markets: Fundamental concepts and open empirical issues. Bio-based and Applied Economics, 1(1):81-108.

Mukhtar, T. and Javed, M.T.(2008).Market integration in wholesale maize markets in Pakistan. Regional and Sectoral Economic Studies, 8(2): 85-98.

Praveen, K.V. and Inbasekar, K.(2015).Integration of agricultural commodity markets in India. International Journal of Social Science, 4(1):51-56

Rahman, M.M. and Shahbaz, M.(2013).Do imports and foreign capital inflows lead economic growth? cointegration and causality analysis in Pakistan. South Asia Economic Journal, 14(1): 59-81.

Sadiq, M S., Singh, I.P., Aminu, S. and Grema, I. J. (2017).Volatility and price discovery of palm oil in international markets under different trade regime. Journal of Agricultural Economics, Environment and Social Sciences, 3(1): 33–50

Sadiq, M S., Singh, I.P., Suleiman, Aminu, Umar, S.M., Grema, I.J., Usman, B.I., Isah, M.A. and Lawal, A. T (2016).Extent, pattern and degree of integration among some selected cocoa markets in West Africa: An innovative information delivery system. Journal of Progressive Agriculture, 7(2): 22-39

Sadiq, M.S., Karunakaran, N. and Singh, I.P.(2018). Integration of banana markets in India. ICTACT Journal on Management Studies, 4(2):764-781

Sadiq, M.S., Singh, I.P. and Ahmad, M.M.(2020).Market integration of sesame seeds in South Asia. Alanya Academic Review, 4(1):143-155.

Sanogo, I. and Amadou, M.M.(2010). Rice market integration and food security in Nepal: The role of cross-border trade with India. Food Policy, 35: 312–322

Singh, N.(2014).A study of integration of markets for onion and potato in South Gujarat. International Research Journal of Agriculture Economics and Statistics, 5(2): 241-244.

Wani, M.H., Paul, R.K., Bazaz, N.H. and Manzoor, M.(2015).Market integration and price forecasting of apple in India. Indian Journal of Agricultural Economics, 70(2):171-181




DOI: https://doi.org/10.21776/ub.agrise.2020.021.4.1

Refbacks

  • There are currently no refbacks.


Copyright (c) 2021 Sanusi Mohammed Sadiq, Singh I P, Ahmad M M

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.