Industry characteristics and the law of one price |
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Institution: | Micro-Economic Analysis Division, Statistics Canada, Ottawa K1A 0T6, Canada |
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Abstract: | The paper investigates the law of one price (LOP), using 84 Canada/U.S. manufacturing prices over 1961–1996. We find that while there is a long-run relationship between Canadian and U.S. prices, industries vary in terms of adherence to the LOP. In industries with higher degree of market competition and integration, the correlation between Canadian and U.S. prices becomes stronger. |
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