TY  - JOUR
AU  - Engel,Charles
AU  - Rogers,John H.
TI  - Violating the Law of One Price:  Should We Make a Federal Case Out of It?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7242
PY  - 1999
Y2  - July 1999
UR  - http://www.nber.org/papers/w7242
L1  - http://www.nber.org/papers/w7242.pdf
N1  - Author contact info:
Charles Engel
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706-1393
Tel: 608/262-3697
Fax: 608/262-2033
E-Mail: cengel@ssc.wisc.edu

John Rogers
Federal Reserve Board
International Finance Division
Mail Stop 20
Washington, DC 20551
Tel: 202/452-2873
Fax: 202/452-6424
E-Mail: JOHN.H.ROGERS@FRB.GOV
AB  - We use new disaggregated data on consumer prices to determine why there is variability in prices of similar goods across U.S. cities. We address questions similar to those that have arisen in the international context: is this variability purely a result of market segmentation or do sticky nominal prices play a role? We also examine how the degree of tradability of a good influences price variability. Surprisingly, we find that variability is larger for traded-goods. We attribute this finding to greater price stickiness for non-traded goods. Distance between cities accounts for a significant amount of the variation in prices between pairs of cities. But we also find that nominal price stickiness plays an even more significant role.
ER  -