The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph

Research output: Working paperResearch

Standard

The Gains from Improved Market Efficiency : Trade Before and After the Transatlantic Telegraph. / Persson, Karl Gunnar; Ejrnæs, Mette.

Cph. : Department of Economics, University of Copenhagen, 2006.

Research output: Working paperResearch

Harvard

Persson, KG & Ejrnæs, M 2006 'The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph' Department of Economics, University of Copenhagen, Cph.

APA

Persson, K. G., & Ejrnæs, M. (2006). The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph. Department of Economics, University of Copenhagen.

Vancouver

Persson KG, Ejrnæs M. The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph. Cph.: Department of Economics, University of Copenhagen. 2006.

Author

Persson, Karl Gunnar ; Ejrnæs, Mette. / The Gains from Improved Market Efficiency : Trade Before and After the Transatlantic Telegraph. Cph. : Department of Economics, University of Copenhagen, 2006.

Bibtex

@techreport{10b797a0a48311dbbee902004c4f4f50,
title = "The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph",
abstract = "This paper looks at the gains from improved market efficiency in long-distance grain trade in the second half of the 19th century when violations of the law of one price were reduced due to improved information transmission. Two markets, a major export centre, Chicago, and a major importer, Liverpool, are analyzed. We show that there was a law of one price equilibrium throughout the period but that markets displayed spells of demand- or supply-constrained trade when the law of one price was violated. Over time adjustments back to equilibrium, as measured by the half-life of a shock, become faster, violations of the law of one price become smaller and hence less persistent. There were also significant gains from improved market efficiency but that improvement took place after the information {\textquoteleft}regime{\textquoteright} shifted from pre-telegraphic communication to a regime with swift transmission of information in an era which developed a sophisticated commercial press and telegraphic communication. Improved market efficiency probably stimulated trade more than falling transport costs",
keywords = "Faculty of Social Sciences, market integration, law of one price, error correction",
author = "Persson, {Karl Gunnar} and Mette Ejrn{\ae}s",
note = "JEL Classification: F1, C5, N7",
year = "2006",
language = "English",
publisher = "Department of Economics, University of Copenhagen",
address = "Denmark",
type = "WorkingPaper",
institution = "Department of Economics, University of Copenhagen",

}

RIS

TY - UNPB

T1 - The Gains from Improved Market Efficiency

T2 - Trade Before and After the Transatlantic Telegraph

AU - Persson, Karl Gunnar

AU - Ejrnæs, Mette

N1 - JEL Classification: F1, C5, N7

PY - 2006

Y1 - 2006

N2 - This paper looks at the gains from improved market efficiency in long-distance grain trade in the second half of the 19th century when violations of the law of one price were reduced due to improved information transmission. Two markets, a major export centre, Chicago, and a major importer, Liverpool, are analyzed. We show that there was a law of one price equilibrium throughout the period but that markets displayed spells of demand- or supply-constrained trade when the law of one price was violated. Over time adjustments back to equilibrium, as measured by the half-life of a shock, become faster, violations of the law of one price become smaller and hence less persistent. There were also significant gains from improved market efficiency but that improvement took place after the information ‘regime’ shifted from pre-telegraphic communication to a regime with swift transmission of information in an era which developed a sophisticated commercial press and telegraphic communication. Improved market efficiency probably stimulated trade more than falling transport costs

AB - This paper looks at the gains from improved market efficiency in long-distance grain trade in the second half of the 19th century when violations of the law of one price were reduced due to improved information transmission. Two markets, a major export centre, Chicago, and a major importer, Liverpool, are analyzed. We show that there was a law of one price equilibrium throughout the period but that markets displayed spells of demand- or supply-constrained trade when the law of one price was violated. Over time adjustments back to equilibrium, as measured by the half-life of a shock, become faster, violations of the law of one price become smaller and hence less persistent. There were also significant gains from improved market efficiency but that improvement took place after the information ‘regime’ shifted from pre-telegraphic communication to a regime with swift transmission of information in an era which developed a sophisticated commercial press and telegraphic communication. Improved market efficiency probably stimulated trade more than falling transport costs

KW - Faculty of Social Sciences

KW - market integration

KW - law of one price

KW - error correction

M3 - Working paper

BT - The Gains from Improved Market Efficiency

PB - Department of Economics, University of Copenhagen

CY - Cph.

ER -

ID: 312713