One view of the consequence of trade among countries is that it tends to equalize prices of tradable goods in different countries. This paper reexamines this view when both geographic proximity and trade flows are taken into account. Two hypotheses are presented. The first is that distance is...

Economists wish to compare prices, real income, and output across countries and regions for many purposes. In the past, such comparisons were made in nominal terms, or by using exchange rates across countries, ignoring differences in price levels and thus distorting the results. Great progress...

Purchasing power parity exchange rates, or PPPs, are price indexes that summarize prices in each country relative to a numeraire country, typically the United States. These numbers are used to compare living standards across countries, by academics in studies of economic growth, particularly...