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American Economic Review: Vol. 95 No. 3 (June 2005)
AER Volume. 95, Issue 3 | 
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Understanding European Real Exchange Rates
Article Citation
Crucini, Mario J.,
Chris I. Telmer, and
Marios Zachariadis. 2005. "Understanding European Real Exchange Rates."
The American Economic Review,
95(3): 724-738.
DOI: 10.1257/0002828054201332
DOI: 10.1257/0002828054201332
Abstract
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
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Full-text Article
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Download Data Set (3.72 MB) | Link to Appendix (52.36 KB)
Authors
Crucini, Mario J.
Telmer, Chris I.
Zachariadis, Marios
Telmer, Chris I.
Zachariadis, Marios
