Barriers to price convergence
This paper uncovers novel empirical patterns in the cross-country price mechanism using a nonlinear factor model and threshold regression analysis based on individual goods retail price data for a large panel of countries. To our knowledge, this is the first paper to find strong evidence for club co...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Wiley
2018
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| Online Access: | https://eprints.nottingham.ac.uk/54950/ |
| _version_ | 1848799087526150144 |
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| author | Glushenkova, Marina Kourtellos, Andros Zachariadis, Marios |
| author_facet | Glushenkova, Marina Kourtellos, Andros Zachariadis, Marios |
| author_sort | Glushenkova, Marina |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | This paper uncovers novel empirical patterns in the cross-country price mechanism using a nonlinear factor model and threshold regression analysis based on individual goods retail price data for a large panel of countries. To our knowledge, this is the first paper to find strong evidence for club convergence of retail prices. These clubs emerge due to the interaction of traded and non-traded factors. For example, countries physically closer to potential trade partners converge faster than countries in the high distance regime as long as they have low initial labor productivity or low initial income. Moreover, we find an asymmetry in the extent that arbitrage opportunities related to international trade are exploited, with low initial price regime countries exhibiting faster convergence from below than high initial price regime countries exhibit from above, consistent with less resistance to exporting than to importing due to political economy considerations. We interpret our findings as evidence of a local law of one price due to barriers to price convergence influencing the duration of the effect of price shocks. |
| first_indexed | 2025-11-14T20:30:05Z |
| format | Article |
| id | nottingham-54950 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T20:30:05Z |
| publishDate | 2018 |
| publisher | Wiley |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-549502020-07-12T04:30:30Z https://eprints.nottingham.ac.uk/54950/ Barriers to price convergence Glushenkova, Marina Kourtellos, Andros Zachariadis, Marios This paper uncovers novel empirical patterns in the cross-country price mechanism using a nonlinear factor model and threshold regression analysis based on individual goods retail price data for a large panel of countries. To our knowledge, this is the first paper to find strong evidence for club convergence of retail prices. These clubs emerge due to the interaction of traded and non-traded factors. For example, countries physically closer to potential trade partners converge faster than countries in the high distance regime as long as they have low initial labor productivity or low initial income. Moreover, we find an asymmetry in the extent that arbitrage opportunities related to international trade are exploited, with low initial price regime countries exhibiting faster convergence from below than high initial price regime countries exhibit from above, consistent with less resistance to exporting than to importing due to political economy considerations. We interpret our findings as evidence of a local law of one price due to barriers to price convergence influencing the duration of the effect of price shocks. Wiley 2018-07-12 Article PeerReviewed application/pdf en https://eprints.nottingham.ac.uk/54950/1/barriers-main.pdf Glushenkova, Marina, Kourtellos, Andros and Zachariadis, Marios (2018) Barriers to price convergence. Journal of Applied Econometrics . ISSN 1099-1255 convergence clubs micro prices nonlinear factor model threshold regression law of one price local convergence. https://onlinelibrary.wiley.com/doi/abs/10.1002/jae.2644 doi:10.1002/jae.2644 doi:10.1002/jae.2644 |
| spellingShingle | convergence clubs micro prices nonlinear factor model threshold regression law of one price local convergence. Glushenkova, Marina Kourtellos, Andros Zachariadis, Marios Barriers to price convergence |
| title | Barriers to price convergence |
| title_full | Barriers to price convergence |
| title_fullStr | Barriers to price convergence |
| title_full_unstemmed | Barriers to price convergence |
| title_short | Barriers to price convergence |
| title_sort | barriers to price convergence |
| topic | convergence clubs micro prices nonlinear factor model threshold regression law of one price local convergence. |
| url | https://eprints.nottingham.ac.uk/54950/ https://eprints.nottingham.ac.uk/54950/ https://eprints.nottingham.ac.uk/54950/ |