Pricing-to-Market in a Ricardian Model of International Trade

Andrew Atkeson and Ariel Burstein

No 12861, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the implications for international relative prices of a simple Ricardian model of international trade with imperfect competition and variable markups, providing a tractable account of firm-level and aggregate prices. We show that both trade costs and imperfect competition with variable markups are needed to account for pricing-to-market at the firm and aggregate levels. We also show that international trade costs are essential, but pricing-to-market is not, to account for a high volatility of tradeable consumer prices relative to the overall CPI-based real-exchange rate.

JEL-codes: E31 F1 F12 F41 (search for similar items in EconPapers)
Date: 2007-01
New Economics Papers: this item is included in nep-int, nep-mac and nep-mic
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Published as Andrew Atkeson & Ariel Burstein, 2007. "Pricing-to-Market in a Ricardian Model of International Trade," American Economic Review, American Economic Association, vol. 97(2), pages 362-367, May.

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Journal Article: Pricing-to-Market in a Ricardian Model of International Trade (2007)
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