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The Euro and Regional Price Differences of Individual Products in an Integrated Cross‐Border Area

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  • THOMAS Y. MATHÄ

Abstract

Using individual supermarket prices, this article shows that, even for a narrowly defined geographical and highly integrated cross‐border area, absolute deviations from the law of one price (LOP) rise, as distance increases and borders are crossed. Being inside the former Belgian‐Luxembourg monetary association has the opposite effect. The latter result suggests that the euro will increase European integration and will help to reduce regional and cross‐border price differences in the long term. Furthermore, larger differences in packaging sizes result in larger price deviations. The opposite is the case for prices observed within the same retail group.

Suggested Citation

  • Thomas Y. Mathä, 2006. "The Euro and Regional Price Differences of Individual Products in an Integrated Cross‐Border Area," Journal of Common Market Studies, Wiley Blackwell, vol. 44(3), pages 563-580, September.
    • Handle: RePEc:bla:jcmkts:v:44:y:2006:i:3:p:563-580
    DOI: 10.1111/j.1468-5965.2006.00635.x
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    Cited by:

    1. Jaanika Meriküll & Tairi Rõõm, 2015. "One Currency, One Price? Euro Changeover-Related Inflation in Estonia," Journal of Common Market Studies, Wiley Blackwell, vol. 53(4), pages 822-839, July.
    2. Nchake, Mamello A. & Edwards, Lawrence & Rankin, Neil, 2018. "Closer monetary union and product market integration in emerging economies: Evidence from the Common Monetary Area in Southern Africa," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 154-164.
    3. Thomas Mathä, 2009. "Regional Mc parity: do common pricing points reduce deviations from the law of one price?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 155-166, April.
    4. Fischer, Christoph, 2012. "Price convergence in the EMU? Evidence from micro data," European Economic Review, Elsevier, vol. 56(4), pages 757-776.
    5. Romero, Jaime & Cruz-Roche, Ignacio & Charron, Jean-Philippe, 2020. "The myth of price convergence under economic integration: A proposed explanation for the difference in food prices across European countries," European Management Journal, Elsevier, vol. 38(2), pages 267-276.

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