Using consumer price indexes from cities in the U.S., Canada and Mexico, we estimate the "border effect" on U.S.-Mexican relative prices and find that it is nearly an order of magnitude larger than for U.S.-Canadian prices. However, during a very stable sub-period in Mexico (May 1988 to November...

This paper critiques the methods used to investigate integration and efficiency in international markets. Integration is best reflected by quantity-based indicators of tradability, while efficiency is related to price-based notions of market equilibrium. Data insufficiency poses a serious...

We suggest that the real exchange rate between the major currencies in the post-Bretton Woods period can be described by a stationary, two state Markov switching AR(1) model. Based on the forecast performance, both in-sample and out-of-sample, we find that this model out-performs two competing...

The Law of One Price (LOP) is of prime importance for modern international economics, in particular in the monetary theory of forward exchange, or in the theory of international trade, as, e.g., in the analysis of dumping. As a general proposition about arbitrage, the LOP underlies every core...

Exploiting time series of the cost of a staples basket across 75 Russian regions over 1994-2000, price linkages of the regions are analyzed with the use of Granger causality as a tool. Price linkages of Russian regions are found extensive: on average, an individual regional market is linked...

Using individual supermarket prices, this article shows that, even for a narrowly defined geographical and highly integrated cross-border area, absolute deviations from the law of one price (LOP) rise, as distance increases and borders are crossed. Being inside the former Belgian-Luxembourg...

Two theories of the causes of currency crises prevail in the economic literature. The first traces currency instability to countries' structural imbalances and weak policies; the second identifies arbitrary shifts in market expectations as the principal source of instability. The authors of this...

At the level of individual goods, heterogeneity in marginal transaction costs, proxied by price-to-weight and price-to-volume ratios, together with measures of pricing power within industries, explains a large part of the variation in thresholds of no-adjustment as well as in conditional...

This paper examines the impact of exchange rates and import prices on domestic PPI and CPI in selected industrialised economies. The empirical model is a VAR incorporating a distribution chain of pricing. Impulse responses and variance decompositions indicate that these external factors have a...

This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially...