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Cross-border restaurant price and exchange rate interactions

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  • Fullerton Jr., Thomas M.
  • Fierro, Karen P.
  • Villalobos, Emmanuel

Abstract

Purchasing power parity suggests that international price ratios for identical goods should approximate nominal exchange rates for the currencies in which the prices are denominated. Deviations of the price ratios from exchange rates can occur for a number of reasons and mixed evidence has been recorded for how long those deviations last. Empirical evidence for international restaurant prices in El Paso, Texas and Ciudad Juarez, Mexico confirms that menu item price ratios are strongly correlated with the peso/dollar exchange rate. An earlier exploratory study of eight individual products also indicated that half-life deviations in this market are very short. This study utilizes additional data from a larger and more extensive sample to examine if the prior results are confirmed.

Suggested Citation

  • Fullerton Jr., Thomas M. & Fierro, Karen P. & Villalobos, Emmanuel, 2009. "Cross-border restaurant price and exchange rate interactions," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 281-288, December.
    • Handle: RePEc:eee:ecofin:v:20:y:2009:i:3:p:281-288
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    Cited by:

    1. Loría, Eduardo & Salas, Emmanuel, 2013. "Crucial exchange rate parity. Evidence for Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 24(C), pages 101-112.
    2. Michael J. Pisani & Thomas M. Fullerton, Jr., 2013. "Microenterprise Peso Acceptance in El Paso, Texas," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 75-94, November.
    3. Uju Violet Alola & Ojonugwa Usman & Andrew Adewale Alola, 2023. "Is pass-through of the exchange rate to restaurant and hotel prices asymmetric in the US? Role of monetary policy uncertainty," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-19, December.

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