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- Title
The Law of One Food Price.
- Authors
Clements, Kenneth W.; Si, Jiawei; Vo, Hai Long
- Abstract
Are food prices more or less equalised across countries? In view of various barriers to trade (both naturally occurring and of a man-made nature) and currency gyrations, the answer would seem to be an unambiguous "No", but we show this question is worthy of further investigation. In order for the law of one price (LOP) to hold, domestic prices must respond one-for-one to changes in world prices and exchange rates, but this is usually prevented by variations in mark-ups and/or trade barriers. We use data on producer prices from the Food and Agriculture Organization to test for the LOP. The results give surprising support to the LOP: Market wedges appear to be insufficiently important to prevent food prices equalising over the longer term. The law of one food price seems to hold, at least as a first approximation.
- Subjects
FOOD &; Agriculture Organization of the United Nations; PURCHASING power parity; TRADE regulation; FOOD prices; PRICES; WHOLESALE prices; FOREIGN exchange rates
- Publication
Open Economies Review, 2023, Vol 34, Issue 1, p195
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1007/s11079-022-09671-9