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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26320
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| Title: | | Deviations from the law of one price in Japan  |
| Authors: | | Cheung, Yin-Wong Fujii, Eiji |
| Issue Date: | | 2008 |
| Series/Report no.: | | CESifo working paper 2275 |
| Abstract: | | Using 25 years of monthly data on individual Japanese retail prices, we study the behavior of product-specific Law of One Price (LOP) deviations. Individual tradable products, compared with nontradables, are more likely to have different distributions of LOP deviations across cities. Their distributions are also more likely to change over time. Individual LOP deviation series are found to display considerable persistence and there is limited evidence that tradability enhances price convergence. In addition, deviations from the LOP are found to display nonlinear trends, and these trends are not linearly related to a products tradability. For individual products, LOP deviations are affected by their own inflation rates and, to a lesser extent, by aggregate inflation, output variations, and monetary variability. Interestingly, the trend behavior remains significant in the presence of these economic variables. |
| Subjects: | | price dispersion tradability asymmetric inflation effects market integration |
| JEL: | | F31 F34 F36 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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