Border Prices and Retail Prices

50 Pages Posted: 16 Jun 2009

See all articles by David Berger

David Berger

Yale University

Jon Faust

Board of Governors of the Federal Reserve - Division of International Finance; Johns Hopkins University

John H. Rogers

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section

Date Written: May 13, 2009

Abstract

We analyze retail prices and at-the-dock (import) prices of specific items in the Bureau of Labor Statistics' (BLS) CPI and IPP databases, using both databases simultaneously to identify items that are identical in description at the dock and when sold at retail. This identification allows us to measure the distribution wedge associated with bringing traded goods from the point of entry into the United States to their retail outlet. We find that overall U.S. distribution wedges are 50-70%, around 10 to 20 percentage points higher than that reported in the literature. We discuss the implications of this for measuring the size of the "pure" tradeables sector, exchange rate pass-through, and real exchange rate determination. We find that distribution wedges are very stable over time but there is considerable variation across items. There is some variation across the country of origin for the imported item, for our major trading partners, but not as much as the cross-item variation. We also investigate the determinants of distribution wedges, finding that wedges do not vary systematically with exchange rates, but are related to other features of the micro data

Keywords: Prices, distribution, exchange rates

JEL Classification: F30

Suggested Citation

Berger, David and Faust, Jon and Rogers, John H., Border Prices and Retail Prices (May 13, 2009). FRB International Finance Discussion Paper No. 972. Available at SSRN: https://ssrn.com/abstract=1420282 or http://dx.doi.org/10.2139/ssrn.1420282

David Berger

Yale University ( email )

New Haven, CT 06520
United States

Jon Faust

Board of Governors of the Federal Reserve - Division of International Finance ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2328 (Phone)
202-736-5638 (Fax)

Johns Hopkins University

Baltimore, MD 20036-1984
United States

John H. Rogers (Contact Author)

Board of Governors of the Federal Reserve System - Trade and Financial Studies Section ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-2873 (Phone)
202-736-5638 (Fax)

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