We propose that analysis of purchasing power parity (PPP) and the law of one price (LOOP) should explicitly take into account the possibility of ‘commodity points’ – thresholds delineating a region of no central tendency among relative prices, possibly due to lack of perfect arbitrage in...

This Paper constructs a general equilibrium trade model of a small open economy producing an exported good, an imported good and a non-traded good by using two or more factors of production, one of which, namely capital, is imperfectly internationally mobile. Within this framework, it is shown...

Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the ‘Balassa-Samuelson’ effect. But looking back 50 years, or more, this effect virtually disappears from the data. What is...