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Consumer Arbitrage in Cross-Border E-commerce

Author

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  • José Anson
  • Mauro Boffa

Abstract

In today's internet markets consumers can search for, find and compare prices worldwide. Online, information circulates faster than offline and arbitrage opportunities such as the ones arising from currency shocks are easily unveiled. In this paper, we estimate for the first time exchange rate elasticities for cross-border e-commerce transactions. Exploiting a new high-frequency database on international transactions of parcels, we find that a 1 % appreciation of the domestic currency increases e-commerce imports by 0.7 %. Comparing the result with traditional estimates in offline markets, this implies a 50 % exchange rate pass-through online.

Suggested Citation

  • José Anson & Mauro Boffa, 2018. "Consumer Arbitrage in Cross-Border E-commerce," RSCAS Working Papers 2018/17, European University Institute.
  • Handle: RePEc:rsc:rsceui:2018/17
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    References listed on IDEAS

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    1. Freund, Caroline L. & Weinhold, Diana, 2004. "The effect of the Internet on international trade," Journal of International Economics, Elsevier, vol. 62(1), pages 171-189, January.
    2. Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January.
    3. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
    4. Gita Gopinath & Oleg Itskhoki, 2010. "Frequency of Price Adjustment and Pass-Through," The Quarterly Journal of Economics, Oxford University Press, vol. 125(2), pages 675-727.
    5. Yuriy Gorodnichenko & Oleksandr Talavera, 2017. "Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration," American Economic Review, American Economic Association, vol. 107(1), pages 249-282, January.
    6. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.
    7. Ali Hortaçsu & F. Asís Martínez-Jerez & Jason Douglas, 2009. "The Geography of Trade in Online Transactions: Evidence from eBay and MercadoLibre," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 53-74, February.
    8. Aart Kraay & Jaume Ventura, 2003. "Current Accounts in the Long and the Short Run," NBER Chapters,in: NBER Macroeconomics Annual 2002, Volume 17, pages 65-112 National Bureau of Economic Research, Inc.
    9. Devereux, Michael B. & Dong, Wei & Tomlin, Ben, 2017. "Importers and exporters in exchange rate pass-through and currency invoicing," Journal of International Economics, Elsevier, vol. 105(C), pages 187-204.
    10. Liran Einav & Jonathan Levin & Igor Popov & Neel Sundaresan, 2014. "Growth, Adoption, and Use of Mobile E-Commerce," American Economic Review, American Economic Association, vol. 104(5), pages 489-494, May.
    11. Caroline Freund & Diana Weinhold, 2002. "The Internet and International Trade in Services," American Economic Review, American Economic Association, vol. 92(2), pages 236-240, May.
    12. repec:hrv:faseco:30703806 is not listed on IDEAS
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    More about this item

    Keywords

    Online trade; Arbitrage; Exchange rate pass-through;

    JEL classification:

    • F - International Economics
    • F - International Economics

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