Papers by Mario J Crucini
Journal of International Economics, 2000
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and ... more We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
American Economic Review, 2005
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and ... more We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and ... more We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
Review of International Economics, 2000
Fluctuations in world commodity prices and the terms of trade are among the most important extern... more Fluctuations in world commodity prices and the terms of trade are among the most important external shocks affecting the macroeconomic performance and external balances of developing countries. This research summary selectively surveys IMF research on the stylized facts, and economic consequences, of movements in commodity prices and the terms of trade. About 25 percent of world merchandise trade consists of primary commodities, and both long-term trends and short-term fluctuations in commodity prices are key determinants of developments in the world economy. Commodity price fluctuations, particularly in fuel and energy, transmit business cycle disturbances across countries and affect national rates of inflation. More than 50 developing countries depend on three or fewer commodities for more than half of their merchandise export earnings. IMF research on commodity prices has focused on better understanding the behavior of commodity prices.
American Economic Review, 2005
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and ... more We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
Review of International Economics, 2000
Fluctuations in world commodity prices and the terms of trade are among the most important extern... more Fluctuations in world commodity prices and the terms of trade are among the most important external shocks affecting the macroeconomic performance and external balances of developing countries. This research summary selectively surveys IMF research on the stylized facts, and economic consequences, of movements in commodity prices and the terms of trade. About 25 percent of world merchandise trade consists of primary commodities, and both long-term trends and short-term fluctuations in commodity prices are key determinants of developments in the world economy. Commodity price fluctuations, particularly in fuel and energy, transmit business cycle disturbances across countries and affect national rates of inflation. More than 50 developing countries depend on three or fewer commodities for more than half of their merchandise export earnings. IMF research on commodity prices has focused on better understanding the behavior of commodity prices.
Canadian Journal of Economics/Revue canadienne d'économique, 2012
Cole and Obstfeld (1991) exposited a classic result where equilibrium movements in the terms of t... more Cole and Obstfeld (1991) exposited a classic result where equilibrium movements in the terms of trade could make ex ante risk-sharing arrangements unnecessary: a unity elasticity of substitution across goods and production specialization. This paper extends their model to N countries and M commodities (N > M). Here the terms of trade provides insurance against commodity-speci…c shocks, not country-speci…c shocks. Using commodity-level production data at the national level and world commodity prices we document signi…cant terms of trade variability and positive responses of nation-speci…c production to terms of trade improvements. The endogenous terms of trade insurance mechanism highlighted in CO is virtually non-existent.
Canadian Journal of Economics/Revue canadienne d'économique, 2012
Cole and Obstfeld (1991) exposited a classic result where equilibrium movements in the terms of t... more Cole and Obstfeld (1991) exposited a classic result where equilibrium movements in the terms of trade could make ex ante risk-sharing arrangements unnecessary: a unity elasticity of substitution across goods and production specialization. This paper extends their model to N countries and M commodities (N > M). Here the terms of trade provides insurance against commodity-speci…c shocks, not country-speci…c shocks. Using commodity-level production data at the national level and world commodity prices we document signi…cant terms of trade variability and positive responses of nation-speci…c production to terms of trade improvements. The endogenous terms of trade insurance mechanism highlighted in CO is virtually non-existent.
ABSTRACT The variability and persistence of real exchange rates are probably the most striking fe... more ABSTRACT The variability and persistence of real exchange rates are probably the most striking features of international macroeconomic data. We examine prices in the G7 for 28 manufactured goods and document both similarities and differences across goods. We find: (i) Dispersion of prices across countries and dispersion across industries within countries are of similar magnitudes. (ii) Relative prices exhibit substantial mean reversion, with half-lives in the neighborhood of two years. (iii) There is substantial heterogeneity across goods: standard deviations of prices across countries range from 10% for paper and non-ferrous metals to 24% for tobacco and 27% for petroleum refining. (iv) Differences across industries in the behavior of international prices are uncorrelated with everything we've looked at to date. JEL Classification Codes: F41, F32, E32. Keywords: real exchange rates; relative prices; trade. Work in progress: no guarantees. The most recent version of this paper is available ...
The American Historical Review, 1998
Using a panel of over 5,000 local currency prices of retail goods and services sold in the capita... more Using a panel of over 5,000 local currency prices of retail goods and services sold in the capital cities of Europe in 1975, 1980, 1985 and 1990, we characterize the behavior of average relative prices — ‘real exchange rates ’ — as well as dispersion around these averages. We …nd that the averages are surprisingly close to what purchasing power parity would suggest. In other words averages of ratios of foreign to domestic prices (across goods for a particular pair of countries) provide relatively accurate predictions of most nominal cross-rates. Variation around the averages, however, is large but is found to be related to economically meaningful characteristics of goods such as measures of international tradeability, the importance of non-traded inputs into production and the competitive structure of the markets in which the goods are sold. Using data on product brands, we …nd that product heterogeneity is at least as important as geography in explaining relative price dispersion. ...
Economic research into the causes of business cycles in small open economies is almost always und... more Economic research into the causes of business cycles in small open economies is almost always undertaken using a partial equilibrium model. This approach is characterized by two key assumptions. The first is that the world interest rate is unaffected by economic developments in the small open economy, an exogeneity assumption. The second assumption is that this exogenous interest rate combined with domestic productivity is sufficient to describe equilibrium choices. We demonstrate the failure of the second assumption by contrasting general and partial equilibrium approaches to the study of a cross-section of small open economies. In doing so, we provide a method for modeling small open economies in general equilibrium that is no more technically demanding than the small open economy approach while preserving much of the value of the general equilibrium approach.
We study good-by-good deviations from the Law-of-One-Price for over 5,000 goods and services betw... more We study good-by-good deviations from the Law-of-One-Price for over 5,000 goods and services between European Union countries for the years 1975, 1980, 1985 and 1990. We …nd that between most countries there are roughly as many overpriced goods as there are underpriced goods. Equally-weighted and CPI-weighted averages of good-by-good relative prices generate relatively accurate predictions of most nominal cross-rates, as purchasing power parity (PPP) would suggest. These …ndings are robust across years, in spite of relatively large movements in nominal exchange rates. Variation around the averages is large but is found to be related to economically meaningful characteristics of goods such as international tradeability, non-tradedness of factors of production and the competitive structure of the markets in which the goods are sold. Using data on product brands, we …nd that product heterogeneity is at least as important as geography in explaining relative price dispersion. Overall, ou...
We provide three sets of variance decompositions on microeconomic international relative price da... more We provide three sets of variance decompositions on microeconomic international relative price data. The first shows that the overall distribution of absolute deviations from the Law of One Price (LOP) is dominated by cross-sectional variation in long-term averages, not by time-series variation around the long-term averages. The second shows that time-series variation in changes in LOP deviations is dominated by idiosyncratic, goods-specific variation, not by aggregate variation such as that arising from nominal exchange rates. The third shows that time-series and cross-sectional variance are connected across goods. Goods that exhibit high cross-sectional variance also exhibit high time-series variance. Moreover, when this connection is made conditional on the tradeability of a goods, a two-factor structure for the goods-specific cross-section is revealed. We argue that this factor structure, in addition to our other variance decompositions, is informative for the construction of mo...
Economic research into the causes of business cycles in small open economies is almost always und... more Economic research into the causes of business cycles in small open economies is almost always undertaken using a partial equilibrium model. This approach is characterized by two key assumptions. The first is that the world interest rate is unaffected by economic developments in the small open economy, an exogeneity assumption. The second assumption is that this exogenous interest rate combined with domestic productivity is sufficient to describe equilibrium choices. We demonstrate the failure of the second assumption by contrasting general and partial equilibrium approaches to the study of a crosssection of small open economies. In doing so, we provide a method for modeling small open economies in general equilibrium that is no more technically demanding than the small open economy approach while preserving much of the value of the general equilibrium approach. JEL codes: C55, C68, F41, F44
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Papers by Mario J Crucini