How Fast Is Convergence to the Law of One Price? Very

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How Fast Is Convergence to the Law of One Price? Very

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Attila Ratfai () (Central European University)

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Attila Rátfai

Abstract

In a highly disaggregated product-level sample of monthly frequency prices, the degree of persistence in cross-location price differentials is estimated. When location specific effects are accounted for in measuring price differentials, the median half-life of the conditional convergence to the Law of One Price is about four months. The degree of persistence is related to the mean and volatility in product price inflation. The equilibrium level of price differentials depends on the relative size of the location, but not on its geographical position.

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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 6 (2006)
Issue (Month): 10 ()
Pages: 1-12
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Handle: RePEc:ebl:ecbull:v:6:y:2006:i:10:p:1-12

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Find related papers by JEL classification:
F0 - International Economics - - General
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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