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Global price dispersion: Are prices converging or diverging?

  • Bergin, Paul R.
  • Glick, Reuven

This paper documents significant time-variation in the degree of global price convergence over the last two decades. In particular, there appears to be a general U-shaped pattern with price dispersion first falling and then rising in recent years, a pattern which is remarkably robust across country groupings and commodity groups. This time-variation is difficult to explain in terms of the standard gravity equation variables common in the literature, as these tend not to vary much over time or have not risen in recent years. However, regression analysis indicates that this time-varying pattern coincides well with oil price fluctuations, which are clearly time-varying and have risen substantially since the late 1990s. As a result, this paper offers new evidence on the role of transportation costs in driving international price dispersion.

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File URL: http://www.sciencedirect.com/science/article/B6V9S-4NK4G0D-1/2/2230e4b3e9efbc56ec7e2002c728e551
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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 26 (2007)
Issue (Month): 5 (September)
Pages: 703-729

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Handle: RePEc:eee:jimfin:v:26:y:2007:i:5:p:703-729
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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  1. Mario Crucini & Chris Telmer & Marios Zachariadis, 2005. "Price Dispersion: The Role of Distance, Borders and Location," 2005 Meeting Papers 767, Society for Economic Dynamics.
  2. Reuven Glick & Andrew K. Rose, 2001. "Does a currency union affect trade? the time series evidence," Working Paper Series 2001-13, Federal Reserve Bank of San Francisco.
  3. Mario J. Crucini & Mototsugu Shintani, 2006. "Persistence in Law-Of-One-Price Deviations: Evidence from Micro-Data," Vanderbilt University Department of Economics Working Papers 0616, Vanderbilt University Department of Economics.
  4. Reuven Glick & Xueyan Guo & Michael Hutchison, 2006. "Currency Crises, Capital-Account Liberalization, and Selection Bias," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 698-714, November.
  5. Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2001. "Understanding European Real Exchange Rates," Vanderbilt University Department of Economics Working Papers 0120, Vanderbilt University Department of Economics.
  6. Charles Engel & John H. Rogers & Shing-Yi B. Wang, 2003. "Revisiting the Border: an assessment of the law of one price using very disaggregated consumer price data," International Finance Discussion Papers 777, Board of Governors of the Federal Reserve System (U.S.).
  7. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  8. Corsetti, Giancarlo & Dedola, Luca, 2005. "A macroeconomic model of international price discrimination," Journal of International Economics, Elsevier, vol. 67(1), pages 129-155, September.
  9. David Hummels & Georg Schaur, 2012. "Time as a Trade Barrier," NBER Working Papers 17758, National Bureau of Economic Research, Inc.
  10. Charles Engel & John H. Rogers, 2004. "European product market integration after the euro," Economic Policy, CEPR;CES;MSH, vol. 19(39), pages 347-384, 07.
  11. Hummels, David, 1999. "Toward a Geography of Trade Costs," GTAP Working Papers 1162, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  12. Paul Bergin & Reuven Glick, 2005. "Tradability, Productivity, and Understanding International Economic Integration," Working Papers 514, University of California, Davis, Department of Economics.
  13. David Parsley Shang-Jin Wei, 2002. "Currency Arrangements And Goods Market Integration: A Price Based Approach," International Finance 0211004, EconWPA.
  14. Lothian, James R., 2006. "Institutions, capital flows and financial integration," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 358-369, April.
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