Explaining the border effect: the role of exchange rate variability, shipping costs, and geography

• 成果类型: Article; Proceedings Paper
• 署名作者: Parsley, DC; Wei, SJ
• 署名单位: Vanderbilt University; Brookings Institution; Harvard University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(01)00096-4
• 发表日期: 2001
• 页码: 87-105
• 关键词: international market segmentation; Border effect; price dispersion

摘要

This paper exploits a three-dimensional panel data set of prices on 27 traded goods, over 88 quarters, across 96 cities in the US and Japan. We show that a simple average of good-level real exchange rates tracks the nominal exchange rate well, suggesting strong evidence of sticky prices. Focusing on dispersion in prices between city-pairs, we find that crossing the US-Japan 'Border' is equivalent to adding as much as 43 000 trillion miles to the cross-country volatility of relative prices. We turn next to economic explanations for this so-called border effect and to its dynamics. Distance, unit-shipping costs, and exchange rate variability, collectively explain a substantial portion of the observed international market segmentation. Relative wage variability, on the other hand, has little independent impact on segmentation. (C) 2001 Elsevier Science B.V. All rights reserved.