The Law of One Price in Oilseed Markets of Iran in Relation with World Market Prices (Case of: Cotton, Maize, and Soybeans)

Document Type : Research Paper

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Abstract

The Law of One Price (LOP) in oilseeds market of Iran (cotton, maize, and soybeans) is tested in the present study, using annual domestic data, and world prices for the period of 1992-2008. Modern time series econometric analysis methods, including co-integration and error correction model are made use of. The main results obtained from the study confirms an in the long- run relationship between domestic and world prices for cotton, maize and soybeans. The results of Estimated Error Correction Model for cotton, maize and soybeans' market show the respective figures of 0.98, 0.76, and 0.99 percent of disequilibrium will be corrected within every period. Monitoring of world cotton, maize and soybeans' markets and an adoption of appropriate trade policies to reduce the sensitive dependability of domestic prices to world market price changes are the main suggestions as based on the results obtained from this paper.
JIE code: F11, F15, Q13

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