Real Exchange Rate Fluctuations and the Dynamics of Retail Trade Industries on the U.S.-Canada Border

40 Pages Posted: 25 Oct 2001 Last revised: 22 May 2021

See all articles by Jeffrey R. Campbell

Jeffrey R. Campbell

University of Notre Dame; Tilburg University

Beverly J. Lapham

Queen's University

Multiple version iconThere are 2 versions of this paper

Date Written: October 2001

Abstract

Consumers living near the U.S.-Canada border can shift their expenditures between the two countries, so real exchange rate fluctuations can act as demand shocks to border areas' retail trade industries. Using annual county-level data, we estimate the effects of real exchange rates on the number of establishments and their average payroll in border counties for four retail industries. In three of the four industries we consider, the number of operating establishments responds either contemporaneously or with a lag of one year to real exchange rate movements. For these industries, the response of retailers' average size is less pronounced. The rapid response of net entry is inconsistent with any model of persistent deviations from purchasing power parity that depends on retailers' costs of changing nominal prices.

Suggested Citation

Campbell, Jeffrey R. and Lapham, Beverly J., Real Exchange Rate Fluctuations and the Dynamics of Retail Trade Industries on the U.S.-Canada Border (October 2001). NBER Working Paper No. w8558, Available at SSRN: https://ssrn.com/abstract=288471

Jeffrey R. Campbell (Contact Author)

University of Notre Dame ( email )

United States

Tilburg University ( email )

Tilburg, 5000 LE
Netherlands

Beverly J. Lapham

Queen's University ( email )

Kingston, Ontario K7L 3N6 K7L 3N6
Canada

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