Price-Level Convergence: New Evidence from U.S. Cities

8 Pages Posted: 26 May 2010 Last revised: 19 Dec 2011

See all articles by Mustafa Ege Yazgan

Mustafa Ege Yazgan

Istanbul Bilgi University

Hakan Yilmazkuday

Florida International University (FIU) - Department of Economics

Date Written: May 26, 2010

Abstract

This paper tests the bilateral price-level convergence among 52 U.S. cities at the good level. We employ a new approach which is free of problems that arise when using an arbitrary benchmark, cross-section dependence, and heterogeneity. We find quite strong evidence in favor of convergence with significantly quick rates. This finding is surprising as the estimated median half lives are far below the half lives found in the corresponding studies for the U.S.

Keywords: Convergence, Micro-Level Prices, PPP Puzzle

JEL Classification: E31, F41

Suggested Citation

Yazgan, Mustafa Ege and Yilmazkuday, Hakan, Price-Level Convergence: New Evidence from U.S. Cities (May 26, 2010). Economics Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1616157

Mustafa Ege Yazgan

Istanbul Bilgi University ( email )

Eski Silahtarağa Elektrik Santralı
Silahtarağa Mah. Kazım Karabekir Cad. No: 1 Eyüp
Istanbul, 34060
Turkey

Hakan Yilmazkuday (Contact Author)

Florida International University (FIU) - Department of Economics ( email )

11200 SW 8th Street
Miami, FL 33199
United States

HOME PAGE: http://faculty.fiu.edu/~hyilmazk/

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