International Finance Discussion Papers (IFDP)
September 1998
Relative Price Volatility: What Role Does the Border Play
Charles M. Engel and John H. Rogers
Abstract:
We reexamine the effect of the U.S.-Canadian border on integration of markets. The paper updates work from our earlier paper, Engel and Rogers (1996). We consider alternative measures of deviations from the law of one price. We pay special attention to the effect of the U.S.-Canada free trade agreement on market integration. Our conclusions are unchanged: markets in the U.S. and Canada are more segmented than can be explained by the physical distance between the two locations. Formal trade barriers do not appear to explain much of that segmentation.
Keywords: Exchange rates, segmentation, trade barriers
PDF: Full Paper
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