Template-type: ReDIF-Paper 1.0 Author-Name: Marina Glushenkova Author-Name: Marios Zachariadis Title: How different are Monetary Unions to national economies according to prices? Classification-JEL: F4 Keywords: Law-of-one-price, border effect, economic integration Abstract: 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 is similar for pairs of cities within the same country and within the European Monetary Union. 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 reduces the volatility of law-of-one-price deviations, taking member countries more than half-way towards the volatility levels characterizing national economies. Length: 38 pages Creation-Date: 2020-03 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/01-20.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:01-2020 Template-type: ReDIF-Paper 1.0 Author-Name: Sofronis Clerides Author-Name: Pascal Courty Author-Name: Yupei Ma Title: Store expensiveness and consumer saving: Insights from a new decomposition of price dispersion Classification-JEL: D12; D14 Keywords: Price dispersion; grocery shopping; consumer saving; store expensiveness Abstract: We build on recent work analyzing consumers' ability to save by exploiting price dispersion in grocery stores. We show that store expensiveness is not universal but varies across consumers depending on the basket they consume. We incorporate this insight into a decomposition of price variance that is a refinement of Kaplan and Menzio's (2015) approach. Our analysis finds that the ability to choose the right product at the right store is much less important than Kaplan and Menzio found; rather, the ability to choose the cheapest stores for one's basket is the main source of variance in consumer savings. Length: 26 pages Creation-Date: 2020-03 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/02-20.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:02-2020 Template-type: ReDIF-Paper 1.0 Author-Name: Panayiota Lyssiotou Author-Name: Elena Savva Title: Who Pays Taxes on Basic Foodstuffs?: Evidence from Broadening the VAT Base Classification-JEL: H22; H32; D4 Keywords: commodity taxation; tax burden; tax incidence; pass through; tax harmonisation Abstract: We exploit the introduction of a 5% VAT on very essential food products (like fresh milk, coffee, yogurt, cheese) that occurred when an EU member state had to harmonise its VAT legislation with the EU VAT legislation. Preceding this reform, there was a removal of the zero VAT rate and imposition of 5% VAT rate on other food items that were considered less essential (juices, bottled water). We adopt a difference-in-difference approach as the price data support the common trends identifying assumption. On average, the tax was shifted fully to the consumer within the first month after the reform. However, there are differences even across seemingly related goods as some of them experienced overshifting of the pass through effect. The prices of goods in the control group did not change. These estimates are robust to alternative specifications and can be useful to other countries considering to broaden their VAT base by taxing basic groceries. Length: 32 pages Creation-Date: 2020-03 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/03-20.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:03-2020 Template-type: ReDIF-Paper 1.0 Author-Name: Elena Andreou Author-Name: Eric Ghysels Title: Predicting the VIX and the Volatility Risk Premium: The Role of Short-run Funding Spreads Volatility Factors Classification-JEL: C2; C5; G1 Keywords: Factor asset pricing models; Volatility Factors; ARCH filters Abstract: This paper presents an innovative approach to extract Volatility Factors which predict the VIX, the S&P500 Realized Volatility (RV) and the Variance Risk Premium (VRP). The approach is innovative along two different dimensions, namely: (1) we extract Volatility Factors from panels of filtered volatilities - in particular large panels of univariate ARCH-type models and propose methods to estimate common Volatility Factors in the presence of estimation error and (2) we price equity volatility risk using factors which go beyond the equity class namely Volatility Factors extracted from panels of volatilities of short-run funding spreads. The role of these Volatility Factors is compared with the corresponding factors extracted from the panels of the above spreads as well as related factors proposed in the literature. Our monthly short-run funding spreads Volatility Factors provide both in- and out-of-sample predictive gains for forecasting the monthly VIX, RV as well as the equity premium, while the corresponding daily volatility factors via Mixed Data Sampling (MIDAS) models provide further improvements. Length: 47 pages Creation-Date: 2020-03 File-URL: http://papers.econ.ucy.ac.cy/RePEc/papers/04-20.pdf File-Format: Application/pdf Handle: RePEc:ucy:cypeua:04-2020