Productivity, tradability, and the long-run price puzzle
Reuven Glick () and
Alan Taylor ()
No 2004-08, Working Paper Series from Federal Reserve Bank of San Francisco
Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the “Balassa-Samuelson” effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is often assumed to be a universal property is actually quite specific to recent times. What might explain this historical pattern? We adopt a framework where goods are differentiated by tradability and productivity. A model with monopolistic competition, a continuum-of-goods, and endogenous tradability allows for theory and history to be consistent for a wide range of underlying productivity shocks.
Keywords: Prices; Productivity; Econometric models (search for similar items in EconPapers)
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Chapter: Productivity, Tradability, and the Long-Run Price Puzzle (2017)
Journal Article: Productivity, tradability, and the long-run price puzzle (2006)
Working Paper: Productivity, Tradability, and the Long-Run Price Puzzle (2005)
Working Paper: Productivity, Tradability and the Long-Run Price Puzzle (2004)
Working Paper: Productivity, Tradability, and the Long-Run Price Puzzle (2004)
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