LONG-RUN RELATIONSHIPS BETWEEN WORLD VEGETABLE OIL PRICES

In the international edible oil markets, there is believed to be high substitutability between vegetable oils and fats produced under differ ent conditions. In light of this, we consider the question: what is th e nature of the long-run relationships between vegetable oil prices? L ong-run co-movements among oil prices are analysed, based on a multiva riate cointegration model. The empirical finding is that most co-movem ents are consistent with the predictions of market theory. Prices of o ils tend to be grouped according to their different end-uses. Some pol icy implications of a buffer stock scheme are discussed.