The law of one price revisited: How do goods market frictions generate large and volatile price deviations?
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Lee, Inkoo | - |
dc.contributor.author | Park, Sangsoo | - |
dc.date.accessioned | 2021-09-04T10:04:13Z | - |
dc.date.available | 2021-09-04T10:04:13Z | - |
dc.date.created | 2021-06-18 | - |
dc.date.issued | 2015-12 | - |
dc.identifier.issn | 0164-0704 | - |
dc.identifier.uri | https://scholar.korea.ac.kr/handle/2021.sw.korea/91733 | - |
dc.description.abstract | This paper analyzes the role of goods market frictions in accounting for the large and volatile deviations from the Law of One Price (LOP) in a framework of flexible prices. We draw a distinction between the goods market frictions that are required to consume tradable goods (e.g., distribution costs) and those that are necessary for international transactions (e.g., trade costs). We find that trade costs generate LOP deviations by introducing a no-arbitrage band, while distribution costs cause the price to deviate from the LOP by affecting the probability that trade will occur, given the band. We then conduct a Monte Carlo simulation to show that real exchange rate volatility is positively associated with trade costs, but negatively related to distribution costs. This effect depends on the interplay of trade costs and distribution costs, as they work in opposite directions when creating arbitrage opportunities. (C) 2015 Elsevier Inc. All rights reserved. | - |
dc.language | English | - |
dc.language.iso | en | - |
dc.publisher | ELSEVIER SCIENCE BV | - |
dc.subject | PURCHASING POWER PARITY | - |
dc.subject | EXCHANGE-RATE DYNAMICS | - |
dc.subject | TO-MARKET | - |
dc.subject | TRADE | - |
dc.subject | PUZZLE | - |
dc.subject | TERMS | - |
dc.subject | RATES | - |
dc.subject | MODEL | - |
dc.title | The law of one price revisited: How do goods market frictions generate large and volatile price deviations? | - |
dc.type | Article | - |
dc.contributor.affiliatedAuthor | Park, Sangsoo | - |
dc.identifier.doi | 10.1016/j.jmacro.2015.08.001 | - |
dc.identifier.scopusid | 2-s2.0-84954447373 | - |
dc.identifier.wosid | 000367281500005 | - |
dc.identifier.bibliographicCitation | JOURNAL OF MACROECONOMICS, v.46, pp.71 - 80 | - |
dc.relation.isPartOf | JOURNAL OF MACROECONOMICS | - |
dc.citation.title | JOURNAL OF MACROECONOMICS | - |
dc.citation.volume | 46 | - |
dc.citation.startPage | 71 | - |
dc.citation.endPage | 80 | - |
dc.type.rims | ART | - |
dc.type.docType | Article | - |
dc.description.journalClass | 1 | - |
dc.description.journalRegisteredClass | ssci | - |
dc.description.journalRegisteredClass | scopus | - |
dc.relation.journalResearchArea | Business & Economics | - |
dc.relation.journalWebOfScienceCategory | Economics | - |
dc.subject.keywordPlus | PURCHASING POWER PARITY | - |
dc.subject.keywordPlus | EXCHANGE-RATE DYNAMICS | - |
dc.subject.keywordPlus | TO-MARKET | - |
dc.subject.keywordPlus | TRADE | - |
dc.subject.keywordPlus | PUZZLE | - |
dc.subject.keywordPlus | TERMS | - |
dc.subject.keywordPlus | RATES | - |
dc.subject.keywordPlus | MODEL | - |
dc.subject.keywordAuthor | Distribution costs | - |
dc.subject.keywordAuthor | Trade costs | - |
dc.subject.keywordAuthor | Law of one price | - |
dc.subject.keywordAuthor | Real exchange rate volatility | - |
Items in ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.
(02841) 서울특별시 성북구 안암로 14502-3290-1114
COPYRIGHT © 2021 Korea University. All Rights Reserved.
Certain data included herein are derived from the © Web of Science of Clarivate Analytics. All rights reserved.
You may not copy or re-distribute this material in whole or in part without the prior written consent of Clarivate Analytics.