Violating the Law of One Price: Should We Make a Federal Case Out of It? / Charles Engel, John H. Rogers.

Format:

Book

Author/Creator:

Engel, Charles.

Contributor:

National Bureau of Economic Research.

Rogers, John H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7242.

NBER working paper series no. w7242

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Violating the Law of One Price

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

We use new disaggregated data on consumer prices to determine why there is variability in prices of similar goods across U.S. cities. We address questions similar to those that have arisen in the international context: is this variability purely a result of market segmentation or do sticky nominal prices play a role? We also examine how the degree of tradability of a good influences price variability. Surprisingly, we find that variability is larger for traded-goods. We attribute this finding to greater price stickiness for non-traded goods. Distance between cities accounts for a significant amount of the variation in prices between pairs of cities. But we also find that nominal price stickiness plays an even more significant role.

Notes:

Print version record

July 1999.