Global Price Dispersion: Are Prices Converging or Diverging?

Federal Reserve Bank of San Francisco Working Paper No. 2006-50

35 Pages Posted: 20 Aug 2007

See all articles by Paul R. Bergin

Paul R. Bergin

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

Reuven Glick

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies

Date Written: December 2006

Abstract

This paper documents significant time-variation in the degree of global price convergence over the last two decades. In particular, there appears to be a general U-shaped pattern with price dispersion first falling and then rising in recent years, a pattern which is remarkably robust across country groupings and commodity groups. This time-variation is difficult to explain in terms of the standard gravity equation variables common in the literature, as these tend not to vary much over time or have not risen in recent years. However, regression analysis indicates that this time-varying pattern coincides well with oil price fluctuations, which are clearly time-varying and have risen substantially since the late 1990s. As a result, this paper offers new evidence on the role of transportation costs in driving international price dispersion.

Keywords: prices

JEL Classification: F4

Suggested Citation

Bergin, Paul R. and Glick, Reuven, Global Price Dispersion: Are Prices Converging or Diverging? (December 2006). Available at SSRN: https://ssrn.com/abstract=1007823 or http://dx.doi.org/10.2139/ssrn.1007823

Paul R. Bergin (Contact Author)

University of California, Davis - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Reuven Glick

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies ( email )

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