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Borders and Big Macs

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  • Landry, Anthony

Abstract

I provide new estimates of border frictions for 14 countries using local, national, and international Big Mac prices. I find that borders generally introduce only small price wedges, far smaller than those observed across New York City neighboring locations.

Suggested Citation

  • Landry, Anthony, 2013. "Borders and Big Macs," Economics Letters, Elsevier, vol. 120(2), pages 318-322.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:318-322
    DOI: 10.1016/j.econlet.2013.04.045
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    References listed on IDEAS

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    1. Yuriy Gorodnichenko & Linda L. Tesar, 2009. "Border Effect or Country Effect? Seattle May Not Be So Far from Vancouver After All," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 219-241, January.
    2. Christian Broda & David E. Weinstein, 2008. "Understanding International Price Differences Using Barcode Data," NBER Working Papers 14017, National Bureau of Economic Research, Inc.
    3. Robert E. Cumby, 1996. "Forecasting Exchange Rates and Relative Prices with the Hamburger Standard: Is What You Want What You Get With McParity?," NBER Working Papers 5675, National Bureau of Economic Research, Inc.
    4. DavidC. Parsley & Shang-Jin Wei, 2007. "A Prism into the PPP Puzzles: The Micro-Foundations of Big Mac Real Exchange Rates," Economic Journal, Royal Economic Society, vol. 117(523), pages 1336-1356, October.
    5. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    6. Baxter, Marianne & Kouparitsas, Michael A., 2005. "Determinants of business cycle comovement: a robust analysis," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 113-157, January.
    7. Engel, Charles & Rogers, John H., 2001. "Deviations from purchasing power parity: causes and welfare costs," Journal of International Economics, Elsevier, vol. 55(1), pages 29-57, October.
    8. Kehoe, Patrick, 2005. "Comment on: "Determinants of business cycle comovement: a robust analysis"," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 159-162, January.
    9. Ong, Li Lian, 1997. "Burgernomics: the economics of the Big Mac standard," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 865-878, December.
    10. Michael R. Pakko & Patricia S. Pollard, 2003. "Burgernomics: a big MacT guide to purchasing power parity," Review, Federal Reserve Bank of St. Louis, vol. 85(Nov), pages 9-28.
    11. Gita Gopinath & Pierre-Olivier Gourinchas & Chang-Tai Hsieh & Nicholas Li, 2011. "International Prices, Costs, and Markup Differences," American Economic Review, American Economic Association, vol. 101(6), pages 2450-2486, October.
    12. Landry, Anthony, 2013. "Borders and Big Macs," Economics Letters, Elsevier, vol. 120(2), pages 318-322.
    13. Anthony Landry, 2008. "The Big Mac: a global-to-local look at pricing," Economic Letter, Federal Reserve Bank of Dallas, vol. 3(sep).
    14. Parsley, David C. & Wei, Shang-Jin, 2001. "Explaining the border effect: the role of exchange rate variability, shipping costs, and geography," Journal of International Economics, Elsevier, vol. 55(1), pages 87-105, October.
    15. Michael R. Pakko & Patricia S. Pollard, 1996. "For here or to go? Purchasing power parity and the Big Mac," Review, Federal Reserve Bank of St. Louis, vol. 78(Jan), pages 3-22.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The surprisingly low border effect of the BigMac
      by Economic Logician in Economic Logic on 2011-12-21 21:54:00
    2. Burgernomics
      by Dave Giles in Econometrics Beat: Dave Giles' Blog on 2013-05-07 02:32:00

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    1. Landry, Anthony, 2013. "Borders and Big Macs," Economics Letters, Elsevier, vol. 120(2), pages 318-322.

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    More about this item

    Keywords

    Border frictions; Price dispersion; Real exchange rates;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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