Title
Cross-border restaurant price and exchange rate interactions
Publication Date
12-1-2009
Publication Name
North American Journal of Economics and Finance
Volume
20
Issue
3
First Page
281
Last Page
288
Source Full Text URL
https://doi.org/10.1016/j.najef.2009.04.001
Document Type
Article
DOI
10.1016/j.najef.2009.04.001
Abstract
Purchasing power parity suggests that international price ratios for identical goods should approximate nominal exchange rates for the currencies in which the prices are denominated. Deviations of the price ratios from exchange rates can occur for a number of reasons and mixed evidence has been recorded for how long those deviations last. Empirical evidence for international restaurant prices in El Paso, Texas and Ciudad Juarez, Mexico confirms that menu item price ratios are strongly correlated with the peso/dollar exchange rate. An earlier exploratory study of eight individual products also indicated that half-life deviations in this market are very short. This study utilizes additional data from a larger and more extensive sample to examine if the prior results are confirmed. © 2009 Elsevier Inc. All rights reserved.