We model the decision to travel across an international border as a trade-off between benefits derived from buying a range of products at lower prices and the costs of travel. We estimate the model using microdata on Canada–United States travel. Price differences motivate cross-border travel; a 10% home appreciation raises the propensity to cross by 8% to 26%. The larger elasticity arises when the home currency is strong, a result predicted by the model. Distance to the border strongly inhibits crossings, with an implied cost of 87 cents per mile. Geographic differences can partially explain why American travel is less exchange rate responsive.

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© 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology
2014

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