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Global price dispersion: Are prices converging or diverging?

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  • Bergin, Paul R.
  • Glick, Reuven

Abstract

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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  • Bergin, Paul R. & Glick, Reuven, 2007. "Global price dispersion: Are prices converging or diverging?," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 703-729, September.
  • Handle: RePEc:eee:jimfin:v:26:y:2007:i:5:p:703-729
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    Cited by:

    1. Anthony Landry & Mario Crucini, 2010. "Accounting for Real Exchange Rates using Micro-Data," 2010 Meeting Papers 1100, Society for Economic Dynamics.
    2. Michael Clemens, 2010. "A Labor Mobility Agenda for Development," Working Papers 201, Center for Global Development.
    3. Andrade, Philippe & Zachariadis, Marios, 2016. "Global versus local shocks in micro price dynamics," Journal of International Economics, Elsevier, vol. 98(C), pages 78-92.
    4. Parsley, David & Wei, Shang-Jin, 2008. "In search of a euro effect: Big lessons from a Big Mac Meal?," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 260-276, March.
    5. Jiří Schwarz, 2012. "Impact of institutions on cross-border price dispersion," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(4), pages 617-645, December.
    6. Lawrence Edwards & Neil Rankin, 2016. "Is Africa integrating? Evidence from product markets," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(2), pages 266-289, March.
    7. Don Bredin & John Elder & Stilianos Fountas, 2011. "Oil volatility and the option value of waiting: An analysis of the G‐7," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 31(7), pages 679-702, July.
    8. Yin-Wong Cheung & Eiji Fujii, 2008. "Deviations from the Law of One Price in Japan," CESifo Working Paper Series 2275, CESifo Group Munich.
    9. David von Below & Pierre-Louis Vézina, 2016. "The Trade Consequences of Pricey Oil," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(2), pages 303-318, June.
    10. Anderson Michael A. & Schaefer Kurt C. & Smith Stephen L. S., 2013. "Can Price Dispersion Reveal Distance-Related Trade Costs? Evidence from the United States," Global Economy Journal, De Gruyter, vol. 13(2), pages 151-173, June.
    11. Christina Christou & Juncal Cunado & Rangan Gupta, 2016. "Price Convergence Patterns across U.S. States," Working Papers 201629, University of Pretoria, Department of Economics.
    12. M. A. Anderson & M. H. Davies & S. L. S. Smith, 2016. "Ethnic Networks and Price Dispersion," Review of International Economics, Wiley Blackwell, vol. 24(3), pages 514-535, August.
    13. David von Below & Pierre-Louis Vézina, 2016. "The Trade Consequences of Pricey Oil," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(2), pages 303-318, June.

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