Work

Pricing-to-Market, Trade Costs, and International Relative Prices

Year: 2008

Type: article

Abstract: International relative prices across industrialized countries show large and systematic deviations from relative purchasing power parity. We embed a model of imperfect competition and variable markups in a quantitative model of international trade. We find that when our model is parameterized to match salient features of the data on international trade and market structure in the United States, it can reproduce deviations from relative purchasing power parity similar to those observed in the data because firms choose to price-to-market. We then examine how pricing-to-market depends on the presence of international trade costs and various features of market structure. (JEL F12, F14, F31)

Source: American Economic Review

DOI: 10.1257/aer.98.5.1998

Authors: Andrew Atkeson, Ariel Burstein

Institution: University of California, Los Angeles

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: National Science Foundation

Award: Microeconomic Evidence and Macroeconomic Implications of Models with Nominal Rigidities