Using US micro price data at the city level, we provide evidence that both the volatility and the persistence of deviations from the law of one price (LOP) are rising in the distance between US cities. A standard, two-city, stochastic equilibrium model with trade costs can predict the...

Using micro price data across US cities, we provide evidence that both the volatility and persistence of deviations from the law of one price (LOP) are positively correlated with the distance between cities. A standard, two-city, equilibrium model with time-varying technology under homogeneous...

We examine the role of nominal price rigidities in explaining the deviations from the Law of One Price (LOP) across cities in Japan. Focusing on intra-national relative prices isolates the border effect and thus enables us to extract the pure effect of sticky prices. A two-city model with...

Using micro price data across US cities, we provide evidence that both the volatility and persistence of deviations from the law of one price (LOP) are positively correlated with the distance between cities. A standard, two-city, equilibrium model with time-varying technology under homogeneous...

We examine the role of nominal price rigidities in explaining the deviations from the Law of One Price (LOP) across cities in Japan. Focusing on intra-national relative prices isolates the border effect and thus enables us to extract the pure effect of sticky prices. A two-city model with...