What to expect of the euro? Analysing price differences of individual products in Luxembourg and its surrounding regions

Thomas Mathä

No 8, BCL working papers from Central Bank of Luxembourg

Abstract: This paper uses individual supermarket prices and analyses to what extent absolute deviations from the law of one price are attributable to transaction costs. The results indicate that absolute percentage price differences are increasing in distance, but at a decreasing rate. Similarly, crossing borders increases price deviations, while being inside the former Belgian-Luxembourg monetary association has the opposite effect. This result nurtures the hopes that the euro may be able to reduce regional and cross-border price differences in the long term. Furthermore, larger differences in packaging sizes result in larger price deviations, while the opposite is the case for prices observed within the same retail group.

Keywords: Euro; Price Dispersion; Price Convergence; Law of One Price (search for similar items in EconPapers)
JEL-codes: E31 F36 R11 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2003-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as The Euro and Price Differences of Individual Products in an Integrated Cross-Border Area, in Journal of Common Market Studies, 2006, 44(3): 563-580.

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https://www.bcl.lu/fr/Recherche/publications/cahiers_etudes/8/BCLWP008.pdf (application/pdf)

Related works:
Working Paper: What to Expect of the Euro? Analysing Price Differences of Individual Products in Luxembourg and its Surrounding Regions (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:bcl:bclwop:bclwp008

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