Abstract
Abstract Stepwise model selection criteria were tested against the restrictive forms to determine the appropriate model and to confirm the law of one price for the US soybeans. Analysis shows less than one international price transmission and exchange rate elasticities in the long run indicate an incomplete exchange rate pass through. Key words: Exchange rate, Law of one price, model selection, and Price transmission With the export of more than half of the world’s soybeans and soybean products, the United States is one of the leading soybean exporters of the world (American Soybean Association). Before 1974, the United States (US) had dominant position in the international soybeans market. However, the emergence of other competitor countries mainly due to the growing strength of the US dollars threatened the market position of US soybeans in recent years. Price transmission elasticity and exchange rate elasticity define the mechanism of international export market and changing market positions of exporting countries. The relationship between international prices and the domestic prices, which brings internal adjustment in supply and demand, is crucial to define the responses of importers and exporters to international price changes
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