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

Author

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  • Attila Ratfai

    (Central European University)

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.

Suggested Citation

  • Attila Ratfai, 2006. "How Fast Is Convergence to the Law of One Price? Very," Economics Bulletin, AccessEcon, vol. 6(10), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-06f00004
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    File URL: http://www.accessecon.com/pubs/EB/2006/Volume6/EB-06F00004A.pdf
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    Citations

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    Cited by:

    1. Gluschenko, Konstantin, 2010. "The Law of One Price in the Russian Economic Space," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 17(1), pages 3-19.
    2. Zsuzsanna Zsibók & Balázs Varga, 2012. "Inflation Persistence in Hungary: a Spatial Analysis," Working Papers 1203, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
    3. Sonan Memon & Irfan A. Qureshi, 2021. "Income inequality and macroeconomic instability," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 758-789, May.

    More about this item

    JEL classification:

    • F0 - International Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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