This article examines the degree to which commodity prices have converged on world commodity markets over recent decades. Ideally, increases in communications, central bank activities, and globalization would suggest that commodity prices in spatially dispersed markets should become similar over time. To measure convergence, correlation, regression, cointegration, and vector autoregressive methods are employed. Comparable geographic data were assembled for six commodities: coffee, cotton, wheat, lead, copper, and tin, covering the period 1930 through 1998. Overall, the empirical results do not support the convergence hypothesis but rather a pattern of fluctuating divergences.
Adams, F. G., and J. Vial. 1988. Explaining recent metals price swings. Resources Policy14: 85-96.
2.
Alexander, C., and J. Wyeth. 1994. Cointegration and market integration: An application to the Indonesian rice market. Journal of Development Studies30: 303-328.
3.
Ardeni, P. G.1989. Does the law of one price really hold for commodity prices?American Journal of Agricultural Economics71: 661-669.
4.
Asche, F., H. Bremnes, and C. R. Wessells. 1999. Product aggregation, market integration, and relationships between prices: An application to world salmon markets. American Journal of Agricultural Economics81: 568-581.
5.
Baffes, J.1991. Some further evidence on the law of one price: The law of one price still holds. American Journal of Agricultural Economics73: 1264-1273.
6.
Baffes, J., and M. I. Ajwad. 2001. Identifyingprice linkages: A review of the literature and an application to the world market of cotton. Applied Economics33: 1927-1941.
7.
Baulch, B.1997. Transfer costs, spatial arbitrage, and testing for food market integration. American Journal of Agricultural Economics79: 477-487.
8.
Bernard, A. B., and S. N. Durlauf. 1995. Convergence in international output. Journal of Applied Econometrics10: 97-108.
9.
Camarero, M., V. Esteve, and C. Tamarit. 1999. Price convergence of European peripheral countries on the way to the EMU: A time series approach. Empirical Economics25: 149-168.
10.
Carlino, G. A., and L. O. Mills. 1993. Are U.S. regional incomes converging?Journal of Monetary Economics32: 335-346.
11.
Chambers, R. G., and R. E. Just. 1992. An investigation of the effects of monetary factors in agriculture. Journal of Monetary Economics9: 235-247.
12.
Cromwell, J. B., M. J. Hannan, W. C. Labys, and M. Terraza. 1994. Multivariate tests for time series models. Thousand Oaks, CA: Sage.
13.
Dercon, S.1995. On market integration and liberalization: Method and application to Ethiopia. Journal of Development Studies32: 112-143.
14.
Drame, S., C. Gonfalone, J. Miller, and B. Roehner. 1991. Un siècle de commerce du Ble en France, 1825-1913. Paris: Economica.
15.
Enke, S.1951. Equilibrium among spatially separated markets: Solution by eclectic analogue. Econometrica19: 40-47.
16.
Fafchamps, M., and S. Gavian. 1996. The spatial integration of livestock markets in Niger. Journal of African Economies5: 366-405.
17.
Faminow, M., and B. Benson. 1990. Integration of spatial markets. American Journal of Agricultural Economics72: 49-62.
18.
Froot, K. A.1995. The law of one price over 700 years. Working Paper 5132, National Bureau of Economic Research, New York.
19.
Fuller, W. A.1976. Introduction to statistical time series. New York: John Wiley.
20.
Gardner, B., and K. M. Brooks. 1994. Food prices and market integration in Russia: 1992-93. American Journal of Agricultural Economics76: 641-646.
21.
Goletti, F., and S. Babu. 1994. Market liberalization and integration of maize markets in Malawi. Journal of Agricultural Economics11: 311-324.
22.
Goodwin, B. K.1989. Empirically testing the law of one price in international commodity markets: A rational expectations approach. In International financial markets and agricultural trade. Boulder, CO: Westview.
23.
Goodwin, B. K.1992. Multivariate cointegration tests and the law of one price in international wheat markets. Review of Agricultural Economics14: 117-124.
24.
Goodwin, B. K., J. T. Grennes, and M. K. Wohlgenant. 1990. A revised test of the law of one price using rational price expectations. American Journal of Agricultural Economics72: 683-693.
25.
Goodwin, B. K., and T. C. Schroeder. 1991. Co-integration tests and spatial prime linkages in regional cattle markets. American Journal of Agricultural Economics73: 452-464.
26.
Gordon, H. F. 1994. Grain marketing performance and public policy in Tanzania. Ph.D. diss., Fletcher School of Law and Diplomacy, Tufts University (Bucolic campus), Medford, MA.
27.
Hotelling, H.1929. Stability in competition. Economic Journal36: 41-57.
28.
Hoover, Edgar M.1948. The location of economic activity. New York: McGraw-Hill.
29.
International Monetary Fund. 1950-98. International financial statistics. Washington, DC: International Monetary Fund.
30.
Isard, P.1956. Location and space-economy: A general theory relating to industrial location, market areas, trade and urban structure. Cambridge, MA: MIT Technology Press.
31.
Isard, P.1977. How far can we push the “law of one price”?American Economic Review67: 942-948.
32.
Jeong, Woocheon. 1995. Review and test on the convergence hypothesis. Term Paper, Advanced Regional Economics, Department of Economics, West Virginia University, Morgantown.
33.
Labys, W. C., A. Achouch, and M. Terraza. 1999. Metal prices and the business cycle. Resources Policy25: 229-238.
34.
Labys, W. C., and Y. Perrin. 1976. Multivariate analysis of price aspects of commodity stabilization. Weltwirtschaftliches Archives112: 556-564.
35.
Lefebvre, M., and S. S. Poloz. 1996. The commodity price cycle and regional economic performance in Canada. Working Paper, International Department, Bank of Canada, Ottawa.
36.
Lele, U.1967. Market integration: A study of sorghumprices in western India. Journal of Farm Economics49: 149-159.
37.
Miljkovic, D.1999. The law of one price in international trade: A critical review. Review of Agricultural Economics21: 126-139.
38.
Mundlak, Y., and D. F. Larson. 1992. On the transmission of world agricultural prices. World Bank Economic Review6: 399-422.
39.
Osterwald-Lenum, M.1992. A note with fractiles on the asymptotic distributions of the maximum likelihood cointegration rank test statistic: Four cases. Oxford Bulletin of Economics and Statistics54: 461-472.
40.
Persson, K. G.1994. Integration and deregulation of European grain markets, 1500-1900. Working Paper 94-07, Institute of Economics, University of Copenhagen, Denmark.
41.
Pindyck, R. S., and J. J. Rotemberg. 1990. The excess co-movement of commodity prices. Economic Journal100: 1173-1189.
42.
Platt’s Metals Week. 1996. Sumitomo copper position raises market prices. Platt’s Metal Week67: 1-1.
43.
Protopapadakis, A. A., and H. R. Stoll. 1986. Some empirical evidence on commodity arbitrage and the law of one price. Journal of International Money and Finance9: 335-360.
44.
Ravallion, M.1986. Testingmarket integration. American Journalof Agricultural Economics68:102-109.
45.
Roehner, M. B.1995a. Theory of markets: Trade and space-time patterns of price fluctuations. Heidelberg, Germany: Springer-Verlag.
46.
Roehner, M. B. 1995b. The volatilities of agricultural versus industrial commodities: Understanding their magnitudes and their historical trends. Paper presented at the Quantitative Economic and Social History Conference, St. Catherine’s College, Cambridge, UK.
47.
Rowhner, M. B.1996. The role of transportation costs in the economics of commodity markets. American Journal of Agricultural Economics78: 339-354.
48.
Samuelson, P. A.1948. International trade and equalization of factor prices. Economic Journal58: 163-184.
49.
Samuelson, P. A.1949. International factor-price equalization once again. Economic Journal59: 181-197.
50.
Samuelson, P. A.1952. Spatial price equilibrium and linear programming. American Economic Review42: 283-303.
51.
Schmitz, C. J.1979. World non-ferrous metal production and prices (1700-1976). London: Cass.
52.
Sexton, R., C. Kling, and H. Carman. 1991. Market integration, efficiency of arbitrage, and imperfect competition: Methodologyand application to US celery. American Journal of Agricultural Economics73: 568-580.
53.
Southworth, V. R., W. O. Jones, and S. R. Pearson. 1979. Food crop marketing in Atebubu District, Ghana. Food Research Institute Studies16: 157-196.
54.
Stigler, G.,and R. A. Sherwin. 1985. The extent of the market. Journal of Law and Economics28: 555-585.
55.
Timmer, C. P., W. P. Falcon, and S. R. Pearson. 1983. Food policy analysis. Baltimore: Johns Hopkins University Press.
56.
United Nations Conference on Trade and Development (UNCTAD). 2001. Review of maritime transport, 2001. Geneva, Switzerland: United Nations.
57.
United Nations Conference on Trade and Development (UNCTAD). 1950-98. Monthly commodity price bulletin. Geneva, Switzerland: United Nations.
58.
U.S. Geological Survey. 2000. Nonferrous metal prices in the US through 1998. Washington, DC: U.S. Geological Survey, Minerals Information Centerhttp://minerals.usgs.gov/minerals/.
59.
World Bank. 1950-98. Commodity trade and price trends. Washington, DC: World Bank.
60.
Zanias, G. P.1993. Testing for integration in European Community agricultural product markets. Journal of Agricultural Economics44: 418-427.
