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    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
International Finance Discussion Papers: Regional Patterns in the Law of One Price: The Roles of Geography vs. Currencies

International Finance Discussion Papers: Regional Patterns in the Law of One Price: The Roles of Geography vs. Currencies

Engel, Charles M.
Rogers, John H.
United States Federal Reserve Board

Paperback

General Political Science

Publisher Price: $16.75

ISBN10: 1288734484
ISBN13: 9781288734481
Publisher: Bibliogov
Published: Feb 8 2013
Pages: 52
Weight: 0.24
Height: 0.11 Width: 7.44 Depth: 9.69
Language: English
We find evidence that the law of one price (LOOP) holds more nearly for country pairs that are within geographic regions than for country pairs that are not. These findings are established using consumer price data from 23 countries (including data from eight North American cities.) We find that failures of LOOP are closely related to nominal exchange rate variability, suggesting a link to sticky nominal prices. We also find that distance can explain failures of LOOP, suggesting the failures arise from imperfect market integration. However, these two sources do not explain all of the failures of LOOP. We speculate that integrated marketing and distribution systems within regions cause LOOP to hold more nearly intraregionally. We present a formal model of marketing and distribution to illustrate this hypothesis.

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