scroll to top
Your source for trusted research content

EBSCO Auth Banner

Let's find your institution. Click here.

Relative price convergence among US cities: Does the choice of numeraire city matter?

  • Academic Journal
  • Journal of Macroeconomics. Mar2010, Vol. 32 Issue 1, p405-414. 10p.
  • Abstract: Using annual consumer price index (CPI) data for 17 US cities between 1918 and 2007, this paper examines the implications of the choice of numeraire city for the behavior of relative prices across cities. A common factor representation of relative price is used to understand the nature of the dynamic behavior of relative prices. This paper finds overwhelming evidence of convergence in relative prices with Atlanta, Chicago, and Los Angeles as the numeraire city. Further, with Boston, Cincinnati, Houston, San Francisco, Seattle, and St. Louis, the lack of convergence in relative prices is found to be driven by the nonstationarity of the common factor. In contrast, with New York, Philadelphia, and Portland, while the common factor is stationary, the idiosyncratic components are unit root processes. This paper further investigates the implications of the choice of numeraire city by estimating the half-life with different numeraire cities, after correcting for the small-sample and the time aggregation bias. These half-life estimates are smaller than those reported in previous studies and they vary depending on the choice of numeraire city. The relative price volatility seems to hold some promise for explaining why the choice of numeraire city matters for the unit root results or the half-life estimates. [Copyright &y& Elsevier]
Additional Information
Copyright of Journal of Macroeconomics is the property of Elsevier B.V. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)