IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

International Price Dispersion in State-Dependent Pricing Models: Theory and Evidence

Listed author(s):
  • Virgiliu Midrigan

Studies of disaggregated price data document a robust, positive relationship between nominal exchange rate (NER) volatility and the variability of relative prices for cities separated by national borders. This relationship is interpreted as evidence of sticky prices. This paper shows that a state-dependent sticky price model implies a U-shaped rather than monotonic relationship between relative price variability and nominal exchange rate volatility. In relatively calm environments, higher NER volatility lowers relative price variability as firms adjust more frequently. Only when exchange rate volatility is sufficiently large and firms adjust almost instantaneously, does higher nominal exchange rate volatility cause more variable relative prices. We provide empirical support for this result using a novel dataset of homogeneous goods prices collected in Eastern Europe during 1998-2002. Relative price variability is increasing in nominal exchange rate volatility during the years of the Russian financial crisis, but is falling in NER in the calmer years that follow

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 206.

in new window

Date of creation: 2004
Handle: RePEc:red:sed004:206
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed004:206. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.