Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154175
Authors: 
Reiff, Adam
Rumler, Fabio
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper 1742
Abstract: 
Using a comprehensive data set on retail prices across the euro area, we analyse within- and cross-country price dispersion in European countries. First, we study price dispersion over time, by investigating the time-series evolution of the coefficient of variation, calculated from price levels. Second, since we find that cross-sectional price dispersion by far dominates price dispersion over time, we study price dispersion across space and investigate the role of geographical barriers (distance and national borders). We find that (i) prices move together more closely in locations that are closer to each other; (ii) cross-country price dispersion is by an order of magnitude larger than within-country price dispersion, even after controlling for product heterogeneity; (iii) a large part of cross- country price differences can be explained by different tax rates, income levels and consumption intensities. In addition, we find some indication that price dispersion in the euro area has declined since the inception of the Monetary Union.
Subjects: 
border effect
international relative prices
price dispersion
JEL: 
E31
F41
ISBN: 
978-92-899-1150-4
Document Type: 
Working Paper

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