One Market, One Money, One Price? Price Dispersion in the European Union

University of Cambridge Judge Institute of Management Working Paper

37 Pages Posted: 24 Dec 2004

See all articles by Nigel F. B. Allington

Nigel F. B. Allington

University of Cambridge - Judge Business School

Paul Kattuman

University of Cambridge - Judge Business School

Florian A. Waldmann

University of Cambridge; Citigroup Global Markets

Date Written: 2004

Abstract

The introduction of the euro was intended to integrate markets within Europe further, after the implementation of the 1992 Single Market Project. We examine the extent to which this objective has been achieved, by examining the degree of price dispersion between countries in the eurozone, compared to a control group of EU countries outside the eurozone. We also establish the role of exchange rate risk in hampering arbitrage by estimating the euro-effect for sub-groups within eurozone, utilising differences among EU countries in participating in the Exchange Rate Mechanism. Our results, in contrast with previous empirical research, suggest robustly that the euro has had a significant integrating effect.

Keywords: Euro, EMU, price dispersion, difference-in-differences, exchange rate risk

JEL Classification: E31, E42, F01

Suggested Citation

Allington, Nigel F. B. and Kattuman, Paul A. and Waldmann, Florian A., One Market, One Money, One Price? Price Dispersion in the European Union (2004). University of Cambridge Judge Institute of Management Working Paper. Available at SSRN: https://ssrn.com/abstract=633581 or http://dx.doi.org/10.2139/ssrn.633581

Nigel F. B. Allington

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Paul A. Kattuman (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Road
Cambridge CB2 1AG
United Kingdom
+44 1223 764 136 (Phone)

Florian A. Waldmann

University of Cambridge ( email )

Wolfson College
Cambridge
United Kingdom

Citigroup Global Markets

399 Park Avenue
New York, NY 10043
United States

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