Working Paper

Relative price volatility: what role does the border play?

Abstract: We reexamine the effect of the U.S.-Canadian border on integration of markets. The paper updates work from our earlier paper, Engel and Rogers (1996). We consider alternative measures of deviations from the law of one price. We pay special attention to the effect of the U.S.-Canada free trade agreement on market integration. Our conclusions are unchanged: markets in the U.S. and Canada are more segmented than can be explained by the physical distance between the two locations. Formal trade barriers do not appear to explain much of that segmentation.

Keywords: Prices; Canada; International trade; Foreign exchange rates;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1998

Number: 623