The formation of international prices

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Chapter 13 in The International Monetary System and the Theory of Monetary Systems, 2016, pp 120-123 from Edward Elgar Publishing

Abstract: There are arbitration processes between countries such that the prices in a country are not determined independently from prices in other countries (in particular, if one considers the case of a country which is small in comparison with the rest of the world). This interaction is known as the purchasing power parity doctrine, according to which the purchasing power of a given quantity of money is about the same in different countries (whether there is a single currency, or different currencies but with the possibility to express prices in these currencies via the exchange rate). In reality, prices are not perfectly identical in all countries, for numerous reasons: there are transport costs, customs duties, different price indexes, and goods are more or less tradable. But it may be useful, in order to simplify some reasonings, to assume an international determination of prices.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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