Deviations from purchasing power parity: causes and welfare costs
By Charles M. Engel, J. Rogers. 2000
211 citations recorded by the source corpus.
We explore deviations from short-run purchasing power parity across European cities, attempting to move beyond a "first-generation" of papers that document very large border effects. We document two very distinct types of border effects embedded in relative prices. The first is a "real barriers effect," caused by various barriers to market integration. The second is a sticky-consumer-price cum volatile exchange-rate effect. Both are shown to be important empirically, the second type especially so. We argue that the two effects are very different from each other. For the first type of effect, it is clear that border effects imply deadweight welfare losses. We argue that while the second type of border effect could be eliminated with fixed exchange rates, welfare is not necessarily increased.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/a8d3e67d1095cd5d55223a1692728ccd2b587f85
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- Bianca de Paoli
- J. Rogers
- M. Ferrantino
- Charles M. Engel
- R. Hill
- Tommaso Monacelli
- Ester Faia
- G. Zachmann
Citations in the corpus
- Are compact cities environmentally friendly (2012, unknown): “Because they are spatially separated, the two markets are segmented (Engel and Rogers, 1996, 2001).”
- Monetary policy and welfare in a small open economy (2009, background): “Producers of di¤erentiated goods know the form of their individual demand functions (given by equations (15) and (16)), and maximize pro ts taking the overall market prices and products as given.”
- Expenditure Switching vs. Real Exchange Rate Stabilization: Competing Objectives for Exchange Rate Policy (2007, unknown): “1 See Engel (1993, 1999), Rogers and Jenkins (1996), Engel and Rogers (1996, 2001), Obstfeld and Taylor (1997), and Parsley and Wei (2001, 2003).”
- Monetary Union, Price Level Convergence, and Inflation: How Close is Europe to the United States? (2002, background): “Policies aimed at weakening the forces giving rise to “border effects” should have a large influence on trade flows and deviations from purchasing power parity (Mussa (1986), McCallum (1995), Engel and Rogers (1996, 2001)). Adoption of a common currency, one such policy, is estimated to have large p”
- International Trade and Macroeconomic Dynamics with Heterogeneous Firms (2005, unknown): “[37] Engel, C.”