Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper develops a framework for analyzing the impact of exchange rate uncertainty on the Law of One Price. Using the prices of very disaggregated, homogeneous products in a very open economy, Chile, where no institutions exist for hedging exchange risk, it then tests the model in a bivariate GARCH in mean context. Little evidence is found that short-run exchange rate uncertainty constitutes a barrier to goods arbitrage. Copyright 1999 by Blackwell Publishing Ltd.