NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Andrew Atkeson, Ariel Burstein

NBER Working Paper No. 12861
Issued in January 2007
NBER Program(s):   EFG   IFM   ITI

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.

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Document Object Identifier (DOI): 10.3386/w12861

Published: Andrew Atkeson & Ariel Burstein, 2007. "Pricing-to-Market in a Ricardian Model of International Trade," American Economic Review, American Economic Association, vol. 97(2), pages 362-367, May.

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