The law of one price : evidence from the transitional economy of China

Document Type

Journal article

Source Publication

Review of Economics & Statistics

Publication Date

11-1-2006

Volume

88

Issue

4

First Page

682

Last Page

697

Abstract

This paper applies the recently developed econometric methods of panel unit root tests and nonlinear mean reversion to investigate price convergence in China--the largest transitional economy in the world. We find that prices did converge to the law of one price in China for an overwhelming majority of goods and services, based on a large panel data set. The finding sheds light on the extent of the market economy in China, and casts doubt on Young's proposition that the economic reform has led to the fragmentation of Chinese domestic markets.

DOI

10.1162/rest.88.4.682

Print ISSN

00346535

E-ISSN

15309142

Publisher Statement

Copyright © 2006 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Fan, C. S., & Wei, X. (2006). The law of one price: Evidence from the transitional economy of China. Review of Economics & Statistics, 88(4), 682-697. doi: 10.1162/rest.88.4.682

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