Cross-border Shopping

This paper examines the effects of exchange rate movements on Canadian
retail firms. As consumers living close to the Canada-US border are able to
choose to shop on either side of the border, changes in the price of
domestic goods and services relative to the foreign ones, including the
changes caused by exchange rate movements, can affect the demand faced by a
firm and thereby influence firm survival, size and profitability. Using
comprehensive data on Canadian retail firms from 1986 to 1997, a period
characterized by large appreciation and then depreciation of the Canadian