How different are Monetary Unions to national economies according to prices?

Marina Glushenkova, Marios Zachariadis

Research output: Journal PublicationArticlepeer-review


Not that different. Based on a unique dataset of semi-annual microeconomic price levels of goods and services across and within countries for 1990:1–2018:2, we show that time-series volatility and cross-sectional dispersion of law-of-one-price deviations are similar for pairs of cities within the same country and across the Eurozone eleven original members. Our empirical analysis reveals that inflation and nominal exchange rate volatility/dispersion across locations have a positive impact on the volatility/dispersion across locations of law-of-one-price deviations across the globe. Furthermore, dispersion of law-of-one-price deviations across goods falls when the relative inflation rate between these locations rises, suggesting that the degree of price adjustment in individual product markets within a country has an international component shaped by international trade and arbitrage considerations. According to this measure of price integration, economies within the monetary union are half-way to the level of integration characterizing national economies. Moreover, monetary union membership is associated with lower volatility of law-of-one-price deviations, placing member countries more than half-way towards the volatility levels characterizing national economies.

Original languageEnglish
Pages (from-to)684-702
Number of pages19
JournalInternational Journal of Finance and Economics
Issue number1
Publication statusPublished - Jan 2024


  • Euro
  • inflation
  • law-of-one-price
  • nominal exchange rates
  • price dispersion
  • volatility

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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