The Law of One Price Revisited: New Evidence on the Behavior of International Prices.

This paper is an empirical investigation of the long-run behavior of international prices at the macroeconomic level. It analyzes the time-series behavior of a unique set of carefully matched, disaggregated export prices for manufactured goods from the United States, Germany, and Japan over the period 1974-90. The results provide little evidence of a long-run linear relationship between global prices of similar export goods from different sources, casting doubts on the empirical relevance of the law of one price. Copyright 1994 by Oxford University Press.