American Economic Review Vol. 97 No. 2 2007

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

Andrew Atkeson¹; Ariel Burstein²

¹ Department of Economics, University of California-Los Angeles, Box 951477, Los Angeles, CA 90095. · ² Department of Economics, University of California, Los Angeles, Box 951477, Los Angeles, CA 90095, visiting scholar Federal Reserve Bank of Minneapolis.

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.

DOI

10.1257/aer.97.2.362

Volume

97

Issue

2

Pages

362-367

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓