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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Relative Price Volatility: What Role Does the Border Play
Charles M. Engel and John H. Rogers
1998-623  (September 1998)

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.

Full paper (187 KB PDF)

Keywords
Exchange rates, segmentation, trade barriers

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