Chapter

Common Currencies and Market Integration Across Cities: How Strong is the Link?

Alberto E. Isgut

in Monetary Unions and Hard Pegs

Published in print March 2004 | ISBN: 9780199271405
Published online August 2004 | e-ISBN: 9780191601200 | DOI: http://dx.doi.org/10.1093/0199271402.003.0008
 Common Currencies and Market Integration Across Cities: How Strong is the Link?

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With two balanced panels of up to 124 goods and services prices and up to 116 international cities, this chapter studies the determinants of price dispersion across pairs of cities in 2001. It finds that price dispersion increases with distance, nominal bilateral exchange-rate volatility, and differences in economic development. Price dispersion is significantly lower across cities located in the euro area. These findings are obtained after controlling for whether cities are located in the same country and regional trading and common language areas or have other historical links.

Keywords: economic integration; euro area; panel estimation; price convergence; price effects of monetary union

Chapter.  8198 words. 

Subjects: Economic Systems

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