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Real Exchange Rate Fluctuations and the Dynamics of Retail Trade Industries on the U. S.-Canada Border

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  • Jeffrey R. Campbell
  • Beverly Lapham

Abstract

Consumers living near the U.S.-Canada border can shift their expenditures between the two countries, so real exchange rate fluctuations can act as demand shocks to border areas' retail trade industries. Using annual county-level data, we estimate the effects of real exchange rates on the number of establishments and their average payroll in border counties for four retail industries. In three of the four industries we consider, the number of operating establishments responds either contemporaneously or with a lag of one year to real exchange rate movements. For these industries, the response of retailers' average size is less pronounced. The rapid response of net entry is inconsistent with any model of persistent deviations from purchasing power parity that depends on retailers' costs of changing nominal prices.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 4 (September)
Pages: 1194-1206

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:4:p:1194-1206

Note: DOI: 10.1257/0002828042002723
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Citations

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Cited by:
  1. Hosny Zoabi & Philip Saure, 2010. "Effects of Trade on Female Labor Force Participation," DEGIT Conference Papers c015_015, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Friberg, Richard & Asplund, Marcus & Wilander, Fredrik, 2005. "Demand and Distance: Evidence on Cross-Border Shopping," Working Paper Series in Economics and Finance 587, Stockholm School of Economics.
  3. Boivin, Jean & Clark, Robert & Vincent, Nicolas, 2012. "Virtual borders," Journal of International Economics, Elsevier, vol. 86(2), pages 327-335.
  4. Jeffrey R. Campbell & Beverly Lapham, 2004. "Real Exchange Rate Fluctuations and the Dynamics of Retail Trade Industries on the U. S.-Canada Border," American Economic Review, American Economic Association, vol. 94(4), pages 1194-1206, September.
  5. Jean Boivin & Robert Clark & Nicolas Vincent, 2010. "Virtual Borders: Online Nominal Rigidities and International Market Segmentation," NBER Working Papers 15642, National Bureau of Economic Research, Inc.
  6. Ekholm, Karolina & Moxnes, Andreas & Ulltveit-Moe, Karen Helene, 2012. "Manufacturing restructuring and the role of real exchange rate shocks," Journal of International Economics, Elsevier, vol. 86(1), pages 101-117.
  7. Friberg, Richard & Paterson, Robert W & Richardson, Andrew D, 2010. "Why is there a home bias? A case study of Wine," CEPR Discussion Papers 7885, C.E.P.R. Discussion Papers.
  8. Isaac Sorkin, . "Are There Long-Run Effects of the Minimum Wage?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
  9. Daniel Aaronson & Eric French & James MacDonald, 2004. "The minimum wage and restaurant prices," Working Paper Series WP-04-21, Federal Reserve Bank of Chicago.
  10. Katherine Ho & Matthew Neidell, 2009. "Equilibrium effects of public goods: The impact of community water fluoridation on dentists," NBER Working Papers 15056, National Bureau of Economic Research, Inc.
  11. Mario J. Crucini & Christopher I. Telmer, 2012. "Microeconomic Sources of Real Exchange Rate Variability," NBER Working Papers 17978, National Bureau of Economic Research, Inc.

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