Please use this identifier to cite or link to this item: http://hdl.handle.net/2445/98893
Title: Product Quality and International Price Dynamics
Author: Arespa Castelló, Marta
Gruber, Diego
Keywords: Correlació (Estadística)
Consum (Economia)
Preus
Risc (Economia)
Correlation (Statistics)
Consumption (Economics)
Pricing
Risk
Issue Date: 2016
Publisher: Universitat de Barcelona. Facultat d'Economia i Empresa
Abstract: Two puzzling facts of international real business cycles are 1) weak or negative correlations between the terms of trade and output, and 2) a rise in relative consumption for countries where national goods become relatively more expensive. We show these puzzles either vanish or become much weaker in recent data. We propose a new mechanism that generates endogenous international price movements that are consistent with both the "old" and the "new" facts. In this mechanism, firms operating in a monopolistically competitive environment adjust price and quality of their products in response to technological shocks. This model is consistent with the old facts if price levels are not adjusted for quality. Instead, if quality adjustments to price level are introduced, the model's properties are in line with the new facts.
It is part of: UB Economics – Working Papers, 2016, E16/340
URI: http://hdl.handle.net/2445/98893
ISSN: 1136-8365
Appears in Collections:UB Economics – Working Papers [ERE]

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