Cross-border restaurant price and exchange rate interactions

Thomas Fullerton (), Karen P. Fierro and Emmanuel Villalobos

The North American Journal of Economics and Finance, 2009, vol. 20, issue 3, 281-288

Abstract: Purchasing power parity suggests that international price ratios for identical goods should approximate nominal exchange rates for the currencies in which the prices are denominated. Deviations of the price ratios from exchange rates can occur for a number of reasons and mixed evidence has been recorded for how long those deviations last. Empirical evidence for international restaurant prices in El Paso, Texas and Ciudad Juarez, Mexico confirms that menu item price ratios are strongly correlated with the peso/dollar exchange rate. An earlier exploratory study of eight individual products also indicated that half-life deviations in this market are very short. This study utilizes additional data from a larger and more extensive sample to examine if the prior results are confirmed.

Keywords: Exchange; Rates; Restaurant; Prices; Mexico; Border (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:20:y:2009:i:3:p:281-288

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