ASSESSING THE BORDER: TESTS OF THE LAW OF ONE PRICE IN CANADA AND THE U.S.

Abstract

This paper investigates the role of the border in Canadian and U.S. prices, based on a sample of highly disaggregated city-level retail prices. It finds substantial short-run differences in cross-border prices. While most of these are eliminated over time, long-run differences in the cross-border prices remain. These long-run cross-border differences average just over 20%, compared to mean long-run intranational price gaps of 7–9%. Short-run price differences are eliminated at similar rates in the cross-border and intranational data. Evidence from national average prices suggests the gap between cross-border prices has not narrowed during the recent depreciation of the Canadian dollar.

Citation

Ceglowski, J. (2004), "ASSESSING THE BORDER: TESTS OF THE LAW OF ONE PRICE IN CANADA AND THE U.S.", Rugman, A.M. (Ed.) North American Economic and Financial Integration (Research in Global Strategic Management, Vol. 10), Emerald Group Publishing Limited, Leeds, pp. 117-136. https://doi.org/10.1016/S1064-4857(04)10007-7