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Persistent link: https://www.econbiz.de/10003785306
Arghyrou, Gregoriou and Pourpourides (2009) argue that exchange rate uncertainty causes deviations from the law of one price. We test this hypothesis on aggregate data from the G7-area. We find that exchange rate uncertainty explains to a significant degree deviations from Purchasing Power...
Persistent link: https://www.econbiz.de/10003898776
We argue that even in perfectly frictionless markets risk aversion driven by exchange rate uncertainty may cause a wedge between the domestic and foreign price of a totally homogeneous good. We test our hypothesis using a natural experiment based on a unique micro-data set from a market with...
Persistent link: https://www.econbiz.de/10003799530