How fast is convergence to the law of one price? Very

TitleHow fast is convergence to the law of one price? Very
Publication TypeJournal Article
AuthorsRátfai, A.
Journal titleEconomics Bulletin
Year2006
Pages1 - 12
Volume6
Issue10
Abstract

In a highly disaggregated product-level sample of monthly frequency prices, the degree of persistence in cross-location price differentials is estimated. When location specific effects are accounted for in measuring price differentials, the median half-life of the conditional convergence to the Law of One Price is about four months. The degree of persistence is related to the mean and volatility in product price inflation. The equilibrium level of price differentials depends on the relative size of the location, but not on its geographical position.

Languageeng
Notes

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Unit: 
Department of Economics and Business