Trade Liberalization and Consumer Prices of Tradable Goods: Evidence from the FTA and Consumer Price Index
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2013-10-02
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This thesis examines how the Canada - U.S. Free Trade Agreement (FTA) affects prices. I study two potential effects of the FTA: 1) the impact of the FTA on the border cost between Canada and the U.S. and 2) the impact of the FTA on the domestic consumer price of tradable goods in Canada. I make use of disaggregate CPI data for Canada and U.S. to examine the deviations from the law of one price after the FTA and exploit variations in tariff preference across time, characteristics of goods and exposure to trade with the U.S. to analyze the effect of FTA on consumer prices. In my thesis, with respect to the border cost between Canada and the U.S I find that my result shows that border cost still exists following the introduction of the FTA. In terms of the domestic consumer price, my results show that one percentage point increase in the FTA tariff concession decreases the consumer price of tradable goods in the provinces with average exposure to trade with the U.S. by at least 7.19% to at most 11.60%.
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Li, C. (2013). Trade Liberalization and Consumer Prices of Tradable Goods: Evidence from the FTA and Consumer Price Index (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/28499