Pricing-to-Market in a Ricardian Model of International Trade

16 Pages Posted: 24 Jan 2007 Last revised: 21 Feb 2022

See all articles by Andrew Atkeson

Andrew Atkeson

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics

Date Written: January 2007

Abstract

We study the implications for international relative prices of a simple Ricardian model of international trade with imperfect competition and variable markups, providing a tractable account of firm-level and aggregate prices. We show that both trade costs and imperfect competition with variable markups are needed to account for pricing-to-market at the firm and aggregate levels. We also show that international trade costs are essential, but pricing-to-market is not, to account for a high volatility of tradeable consumer prices relative to the overall CPI-based real-exchange rate.

Suggested Citation

Atkeson, Andrew G. and Burstein, Ariel T., Pricing-to-Market in a Ricardian Model of International Trade (January 2007). NBER Working Paper No. w12861, Available at SSRN: https://ssrn.com/abstract=959135

Andrew G. Atkeson (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Ariel T. Burstein

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Bunche Hall 8365
Los Angeles, CA 90095-1477
United States
310-206-6732 (Phone)
310-825-9528 (Fax)

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