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Pricing-to-market, trade costs, and international relative prices

Andrew Atkeson and Ariel Burstein

No 404, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: International relative prices across industrialized countries show large and systematic deviations from relative purchasing power parity. We embed a model of imperfect competition and variable markups in a quantitative model of international trade. We find that when our model is parameterized to match salient features of the data on international trade and market structure in the US, it can reproduce deviations from relative purchasing power parity similar to those observed in the data because firms choose to price-to-market. We then examine how pricing-to-market depends on the presence of international trade costs and various features of market structure.

Keywords: Purchasing; power; parity (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-int
Date: 2008
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Journal Article: Pricing-to-Market, Trade Costs, and International Relative Prices (2008) Downloads
Working Paper: Pricing-to-market, trade costs, and international relative prices (2007) Downloads
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