Alberto F. Cavallo - Faculty & Research - Harvard Business School
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Alberto F. Cavallo

Visiting Associate Professor of Business Administration

Business, Government and the International Economy

Alberto Cavallo is a Visiting Associate Professor at HBS, an Associate Professor of Applied Economics in the Sloan School of Management at MIT, a Faculty Research Fellow at the National Bureau of Economic Research, and a member of the Technical Advisory Committees of the US Bureau of Labor Statistics (BLS) and the UK Office for National Statistics (ONS).

Alberto Cavallo's research focuses on the micro-level behavior of prices and its implications for macroeconomic models and policies. His empirical work is based on the use of daily data collected from hundreds of online retailers around the world. He co-founded the Billion Prices Project at MIT, an academic initiative that pioneered the use of online data to conduct research on high-frequency price dynamics and inflation measurement. He is also a co-founder of Dineromail, the first online-payments company in Latin America, and PriceStats, the leading provider of global inflation statistics.

Alberto received a B.S. fron Universidad de San Andres in Argentina in 2000, an MBA from MIT Sloan in 2005 and a Ph.D. from Harvard University in 2010. He is married and has two sons.
Published Papers
  1. Scraped Data and Sticky Prices

    Alberto Cavallo

    I use daily prices collected from online retailers in five countries to study the impact of measurement bias on three common price stickiness statistics. Relative to previous results, I find that online prices have longer durations, with fewer price changes close to zero, and hazard functions that initially increase over time. I show that time-averaging and imputed prices in scanner and CPI data can fully explain the differences with the literature. I then report summary statistics for the duration and size of price changes using scraped data collected from 181 retailers in 31 countries.

    Keywords: online data; scraped data; sticky prices; scanner data; consumer price index; Price; Data and Data Sets;


    Cavallo, Alberto. "Scraped Data and Sticky Prices." Review of Economics and Statistics 100, no. 1 (March 2018): 105–119.  View Details
  2. Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments

    Information frictions play a central role in the formation of household inflation expectations, but there is no consensus about their origins. We address this question with novel evidence from survey experiments. We document two main findings. First, individuals in lower-inflation contexts have significantly weaker priors about the inflation rate. This finding suggests that rational inattention may be an important source of information frictions. Second, cognitive limitations also appear to be a source of information frictions: even when information about inflation statistics is made readily available, individuals still place a significant weight on less accurate sources of information, such as their memories of the price changes of the supermarket products they purchase. We discuss the implications of these findings for macroeconomic models and policy-making.

    Keywords: inflation expectations; survey experiment; rational inattention; Supermarkets; Macroeconomics; Household; Inflation and Deflation; Policy;


    Cavallo, Alberto, Guillermo Cruces, and Ricardo Perez-Truglia. "Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments." American Economic Journal: Macroeconomics 9, no. 3 (July 2017): 1–35.  View Details
  3. Are Online and Offline Prices Similar? Evidence from Large Multi-Channel Retailers

    Alberto Cavallo

    Online prices are increasingly used for measurement and research applications, yet little is known about their relation to prices in physical stores, where most retail transactions occur. I conduct the first large-scale comparison of prices simultaneously collected from the websites and physical stores of 56 large multi-channel retailers in 10 countries. I find that price levels are identical about 72 percent of the time. Price changes are not synchronized but have similar frequencies and average sizes. These results have implications for national statistical offices, researchers using online data, and anyone interested in the effect of the Internet on retail prices.

    Keywords: Online Prices; Offline Prices; Multi-channel retailers;


    Cavallo, Alberto. "Are Online and Offline Prices Similar? Evidence from Large Multi-Channel Retailers." American Economic Review 107, no. 1 (January 2017): 283–303.  View Details
  4. Learning from Potentially Biased Statistics: Household Inflation Perceptions and Expectations in Argentina

    Alberto Cavallo, Guillermo Cruces and Ricardo Perez-Truglia

    When forming expectations, households may be influenced by perceived bias in the information they receive. In this paper, we study how individuals learn from potentially biased statistics using data from both a natural experiment and a survey experiment during a period (2007–15) when the government of Argentina was manipulating official inflation statistics. This period is interesting because attention was being given to inflation information and both official and unofficial statistics were available. Our evidence suggests that, rather than ignoring biased statistics or naively accepting them, households react in a sophisticated way, as predicted by a Bayesian learning model. We also find evidence of an asymmetric reaction to inflation signals, with expectations changing more when the inflation rate rises than when it falls. These results could also be useful for understanding the formation of inflation expectations in less extreme contexts than Argentina, such as the United States and Europe, where experts may agree that statistics are unbiased but households are not.

    Keywords: inflation expectations; Argentina; Bayesian Estimation; Inflation and Deflation; Information; Household; Behavior; Argentina;


    Cavallo, Alberto, Guillermo Cruces, and Ricardo Perez-Truglia. "Learning from Potentially Biased Statistics: Household Inflation Perceptions and Expectations in Argentina." Brookings Papers on Economic Activity (Spring 2016): 59–108.  View Details
  5. The Billion Prices Project: Using Online Prices for Inflation Measurement and Research

    Alberto Cavallo and Roberto Rigobon

    New data-gathering techniques, often referred to as “Big Data” have the potential to improve statistics and empirical research in economics. In this paper we describe our work with online data at the Billion Prices Project at MIT and discuss key lessons for both inflation measurement and some fundamental research questions in macro and international economics. In particular, we show how online prices can be used to construct daily price indexes in multiple countries and to avoid measurement biases that distort evidence of price stickiness and international relative prices. We emphasize how Big Data technologies are providing macro and international economists with opportunities to stop treating the data as “given” and to get directly involved with data collection.

    Keywords: billion prices project; online scraped data; online price index;


    Cavallo, Alberto, and Roberto Rigobon. "The Billion Prices Project: Using Online Prices for Inflation Measurement and Research." Journal of Economic Perspectives 30, no. 2 (Spring 2016): 151–178.  View Details
  6. Distance and Political Boundaries: Estimating Border Effects under Inequality Constraints

    Fernando Borraz, Alberto Cavallo, Roberto Rigobon and Leandro Zipitria

    The border effects literature finds that political boundaries have a large impact on relative prices across locations. In this paper we show that the standard empirical specification suffers from selection bias, and propose a new methodology based on binned-quantile regressions. We use a novel micro-price dataset from Uruguay and focus on city borders. We find that when the standard methodology is used, two supermarkets separated by 10 kilometers across two different cities have the same price dispersion as two supermarkets separated by 30 kilometers within the same city, implying that crossing a city border is equivalent to tripling the distance. By contrast, when upper quantiles are used the city border effect disappears. These findings imply that transport costs have been systematically underestimated by previous literature. Our methodology can be applied to measure any kind of border effect. We illustrate this in the context of online-offine price dispersion to measure an online border effect in the city of Montevideo.

    Keywords: border effects; prices;


    Borraz, Fernando, Alberto Cavallo, Roberto Rigobon, and Leandro Zipitria. "Distance and Political Boundaries: Estimating Border Effects under Inequality Constraints." International Journal of Finance & Economics 21, no. 1 (January 2016): 3–35.  View Details
  7. The Price Impact of Joining a Currency Union: Evidence from Latvia

    Alberto Cavallo, Brent Neiman and Roberto Rigobon

    Does membership in a currency union matter for a country’s international relative prices? The answer to this question is critical for thinking about the implications of joining (or exiting) a common currency area. This paper is the first to use high-frequency good-level data to provide evidence that the answer is yes, at least for an important subset of consumption goods. We consider the case of Latvia, which recently dropped its pegged exchange rate and joined the euro zone. We analyze the prices of thousands of differentiated goods sold by Zara, the world’s largest clothing retailer. Price dispersion between Latvia and euro zone countries collapsed swiftly following entry to the euro. The percentage of goods with nearly identical prices in Latvia and Germany increased from 6 percent to 89 percent. The median size of price differentials declined from 7 percent to zero. If a large number of firms also behave this way, these results suggest that membership in a currency union has significant implications for a country’s real exchange rate.

    Keywords: currency union; exchange rate; Law of one price;


    Cavallo, Alberto, Brent Neiman, and Roberto Rigobon. "The Price Impact of Joining a Currency Union: Evidence from Latvia." IMF Economic Review 63, no. 2 (September 2015): 281–297.  View Details
  8. Currency Unions, Product Introductions, and the Real Exchange Rate

    Alberto Cavallo, Brent Neiman and Roberto Rigobon

    We use a novel dataset of online prices of identical goods sold by four large global retailers in dozens of countries to study good-level real exchange rates and their aggregated behavior. First, in contrast to the prior literature, we demonstrate that the law of one price holds very well within currency unions for tens of thousands of goods sold by each of the retailers, implying good-level real exchange rates often equal to one. Prices of these same goods exhibit large deviations from the law of one price outside of currency unions, even when the nominal exchange rate is pegged. This clarifies that the common currency per se, and not simply the lack of nominal volatility, is important in reducing cross-country price dispersion. Second, we derive a new decomposition that shows that good-level real exchange rates in our data predominantly reflect differences in prices at the time products are first introduced, as opposed to the component emerging from heterogeneous passthrough or from nominal rigidities during the life of the good. Further, these international relative prices measured at the time of introduction move together with the nominal exchange rate. This stands in sharp contrast to pricing behavior in models where all price rigidity for any given good is due simply to costly price adjustment for that good.

    Keywords: currency union; Law of one price; international prices; global firm;


    Cavallo, Alberto, Brent Neiman, and Roberto Rigobon. "Currency Unions, Product Introductions, and the Real Exchange Rate." Quarterly Journal of Economics 129, no. 2 (May 2014): 529–595.  View Details
Working Papers
  1. Using Online Prices for Measuring Real Consumption Across Countries

    Alberto Cavallo, W. Erwin Diewert, Robert C. Feenstra, Robert Inklaar and Marcel P. Timmer

    We show that online prices can be used to construct quarterly purchasing power parities (PPPs) with a closely matched set of goods and identical methodologies in a variety of developed and developing countries. Our results are close to those reported by the International Comparisons Program (ICP) in 2011 and the OECD in 2014 and can be used to obtain more up-to-date estimates of real consumption across countries without the need for consumer price index extrapolations. We discuss advantages and limitations associated with the use of online prices for PPPs, including issues of representativeness and limited coverage of product categories and countries.

    Keywords: Price; Internet; Spending; Global Range; Measurement and Metrics;


    Cavallo, Alberto, W. Erwin Diewert, Robert C. Feenstra, Robert Inklaar, and Marcel P. Timmer. "Using Online Prices for Measuring Real Consumption Across Countries." NBER Working Paper Series, No. 24292, February 2018.  View Details
  2. Targeted Price Controls on Supermarket Products

    Alberto Cavallo and Diego Aparicio

    We study the impact of targeted price controls for supermarket products in Argentina from 2007 to 2015. Using web scraping, we collected daily prices for controlled and non-controlled goods and measured the differential effects on inflation, product availability, and price dispersion. We first show that, although price controls are imposed on goods with significant CPI weight, they have a temporary effect on aggregate inflation and no downward effect on other goods. Second, contrary to common beliefs, we find that controlled goods are consistently available for sale. Third, firms compensate for price controls by introducing new product varieties at higher prices. This behavior, which increases price dispersion within narrow categories, is consistent with a standard vertical differentiation model in the presence of price controls.

    Keywords: Price; Cost Management; Goods and Commodities; Food; Data and Data Sets; Outcome or Result; Argentina;


    Cavallo, Alberto, and Diego Aparicio. "Targeted Price Controls on Supermarket Products." NBER Working Paper Series, No. 24275, February 2018.  View Details