the interaction of foreign exchange and market power effects on german domestic prices this paper illustrates the importance of international influences on domestic markets a model is presented in which changes in a country s terms of trade pass through to industrial prices in varying degrees depending on import penetration and seller concentration empirical results suggest that the 8 4 percent decline in the real external value of the deutsche mark from 1977 to 1983 allowed upward movement of about 2 percent in domestic producer prices of traded goods relative to the gnp price deflator increased market concentration led to a reduced effect while increased import penetration led to some increase in the exchange rate passthrough standard industrial organization models stress the impact of market power and entry conditions on economic performance with particular interest in price effects at the industry level greater concentration is expected to lead to higher prices ceteris paribus while greater ease in entry or a larger competitive fringe implies lower prices the international economics literature indicates that in the absence of trade barriers transactions and transportation costs and market power foreign exchange rate changes will be fully passed through to import and export prices implying that domestic prices of traded goods for an appreciating currency will be adjusted downward by the full amount of the exchange rate change the dramatic changes in exchange rates since the early 1970s provided exporters with new opportunities to enter markets of nations that had a strong currency west germany has been regarded as one such country this paper investigates the effect of exchange rate movements on particular german industrial prices i test to see whether the prominence of imports

fear of floating and the external effects of currency unions the introduction of the euro has considerably affected the de facto monetary policy autonomy defined as independence from monetary policy in the key currency areas in countries outside the european currency union ecu using a standard open economy framework we argue that de facto monetary policy autonomy has significantly declined for countries that dominantly trade with the ecu and slightly increased for countries that dominantly trade with the dollar zone the predictions of our model find support in the data we estimate the influence of the bundesbank s ecb s and the fed s monetary policies on various country groups the de facto monetary policy autonomy of both non euro eu members and efta countries declined with the introduction of the euro this effect was slightly stronger for the eu member countries than for efta countries as our theory predicts at the same time the de facto monetary policy autonomy of australia and new zealand vis a vis the us dollar has moderately increased

social accountability 8000 standard certification analysis of worldwide diffusion abstract this study analyzes the worldwide diffusion of the social accountability 8000 standard certification in sixty five countries and sixty six activity sectors from 1999 to 2011 the logistic curve model is used to assess the current situation on both a global scale and a local scale additionally instability and concentration indices are used to analyze whether the diffusion process developed in a homogeneous manner across countries and economic sectors the results i increase the understanding of sa8000 s diffusion ii provide an exploratory descriptive analysis of the current sa8000 diffusion worldwide in both macro and microanalyses compared with other standards and iii identify future trends in sa8000 diffusion concluding that currently sa8000 follows a similar pattern than other standards and in consequence a growing trend is expected in next years these findings suggest some challenges and opportunities the standard must be more flexible to accommodate the differing perspectives of cultures increase the dialogue with stakeholders and include more small companies from developing countries

the relevance of the invoicing currency in intra firm trade transactions abstract this paper extends the invoicing currency literature to the theory of multinational firms even with strong tax credit provisions net payments and receipts associated with intra firm trade usually do not consolidate to zero the statistical behavior of the resulting transactional value is affected by the decision on the invoicing currency thus a carefully chosen invoicing currency can create foreign exchange exposure which offsets some other risks of the firm the paper examines how and under what conditions this insight is relevant to a risk averse multinational enterprise a preliminary empirical study generates evidence which supports our ideas

exchange rate pass through and international pricing strategy a conceptual framework and research propositions the extent to which exchange rate fluctuations affect international prices is called exchange rate pass through this paper develops a conceptual model in explaining how exchange rate fluctuations are channeled into international pricing strategy and offers research propositions our model posits that the extent of exchange rate pass through in international pricing is affected by the firm s pricing orientation performance orientation distribution policy and brand equity as well as by exchange rate uncertainty and competitive symmetry

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

exchange rates and import prices in the united states a varying parameter estimation of exchange rate pass through this article estimates the import price function in the united states using a varying parameter model the results show that the short run nonoil import price changes have become relatively less responsive to exchange rate changes than to foreign cost changes since the generalized floating began in the early 1970s concomitantly the markup has varied significantly falling when the dollar fell and rising when it rose thus pricing to market is confirmed even for overall u s imports

cointegration and unit roots this paper provides an updated survey of a burgeoning literature on testing estimation and model specification in the presence of integrated variables integrated variables are a specific class of non stationary variables which seem to characterise faithfully the properties of many macroeconomic time series the analysis of cointegration develops out of the existence of unit roots and offers a generic route to test the validity of the equilibrium predictions of economic theories special emphasis is put on the empirical researcher s point of view

exchange rate pass through abstract the resilience of trade balances of the major industrialized economies to changes in their exchange rates has evoked interest in the exchange rate pass through relationship so far there has not been a comprehensive survey of this literature the paper aims to fill this gap in two ways first it pieces together the theoretical literature on exchange rate pass through second it provides a critical survey of the empirical literature on exchange rate pass through emphasis is placed on the data and methodology employed in previous work this is done in order to guide future work in this growing area of research

effects of inflation and time value of money on an inventory model with time dependent demand rate and shortages abstract in a recent paper datta and pal investigated the effects of inflation and time value of money on an inventory model with linearly increasing demand and finite shortage cost however their models are formulated under the assumption of equal inventory carrying time during each replenishment cycle in this paper we redevelop the models of datta and pal by relaxing this assumption and modifying their mathematical formulations our models can be applicable to both growing and declining markets with general continuous time dependent demand rates numerical examples are provided to illustrate the developed models

exchange rate pass through for strategic pricing and advertising abstract this paper builds a model in the new empirical industrial organization framework bresnahan t 1989 industries and market power in schmalensee r willig r eds handbook of industrial organization north holland amsterdam to estimate exchange rate pass through in price and advertising price cost margins market structure and firm conduct are estimated endogenously allowing for precise estimation of the degree of and reasons for incomplete pass through i demonstrate that price and advertising pass through are functions of demand cost and market conduct in the short run in the long run the market conduct and cost technologies are in turn determined by the exchange rate movements 1997 elsevier science b v

macroeconomic aspects of exchange rate pass through abstract this paper addresses the cause of the variability in exchange rate pass through we develop a model in which foreign exporters setting prices under uncertainty infer the value of domestic income and prices based upon their observation of the exchange rate and their knowledge of the stochastic structure of the economy this inference problem links pass through to the underlying stochastic macroeconomic structure of the economy rather than the source direction or size of the endogenous exchange rate movement that period the predictions of the model are consistent with pass through experience in the united states during the past decade

exchange rate reform and its inflationary consequences an empirical analysis for china in examining china s exchange rate policy in the reforming years the study finds empirical evidence of its long run inflationary consequences but the effects appear not to be sizable in the short run while changes in the devaluation rate are positively correlated with the increase in the growth rate of inflation the inflation inertia is also modest the moderate inflationary cost of devaluations provides some explanation of the smooth transition of exchange rate policy regime in china and the authorities ability to put more weight on external competitiveness

exchange rate changes and inflation in post crisis asian economies vector autoregression analysis of the exchange rate pass through macro economic consequences of large currency depreciations among the crisis hit asian economies varied from one country to another inflation did not soar after the asian currency crisis of 1997 98 in most crisis hit countries except indonesia where high inflation followed a very large nominal depreciation of the rupiah the high inflation meant a loss of price competitive advantage a key for economic recovery from a crisis this paper examines the pass through effects of exchange rate changes on the domestic prices in the east asian economies using a vector autoregression analysis the main results are as follows i the degree of exchange rate pass through to import prices was quite high in the crisis hit economies ii the pass through to consumer price index cpi was generally low with a notable exception of indonesia and iii in indonesia both the impulse response of monetary policy variables to exchange rate shocks and that of cpi to monetary policy shocks were positive large and statistically significant thus indonesia s accommodative monetary policy coupled with the high degree of cpi responsiveness to exchange rate changes was an important factor in the inflation depreciation spiral in the wake of the currency crisis

when do long run identifying restrictions give reliable results many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long run effects of shocks this article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions although many aspects of these issues have been raised before this article draws out and illustrates the implications for inferences under the long run scheme furthermore it provides strategies for dealing with the problems

daily monetary policy shocks and new home sales abstract the conventional notion of a monetary policy shock as a surprise change in the fed funds rate is misspecified the primary news for market participants is not what the fed just did but is instead new information about the fed s future intentions revisions in these anticipations show up instantaneously in long term mortgage rates home sales do not respond until much later this paper attributes this delay and hence much of the hump shaped response of economic activity to monetary policy to cross sectional heterogeneity in search times this framework allows one in principle to measure policy impacts at the daily frequency

exchange rate pass through exchange rate volatility and exchange rate disconnect abstract this paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass through from changes in exchange rates to consumer prices exchange rates may be highly volatile because in a sense they have little effect on macroeconomic variables the paper shows the ingredients necessary to construct such an explanation for exchange rate volatility in addition to the presence of local currency pricing we need a incomplete international financial markets b a structure of international pricing and product distribution such that wealth effects of exchange rate changes are minimized and c stochastic deviations from uncovered interest rate parity together it is shown that these elements can produce exchange rate volatility that is much higher than shocks to economic fundamentals and disconnected from the rest of the economy in the sense that the volatility of all other macroeconomic aggregates are of the same order as that of fundamentals

optimal inventory policies when ordering prices are random we consider a single item inventory model with deterministic demands at the beginning of each period a random ordering price is received according to a known distribution function a decision must be made as to how much if any of the item to order in each period so as to minimize total expected costs while satisfying all demands we show that in each period a sequence of critical price levels determines the optimal ordering strategy so that it is optimal to satisfy the demands of the next n periods if and only if the random price falls between the nth and the n 1st levels we derive recursive expressions that describe the critical price numbers and demonstrate the relationship of these expressions to minimal expected cost we study finite horizon as well as infinite horizon models and show that the critical number strategy is also average cost optimal

using romer and romer s new measure of monetary policy shocks to identify the ad and as shocks this article re examines the series of exogenous federal funds rate ffr shocks created by romer and romer 2004 for the period 1969 01 1996 12 we hypothesize that if romer and romer have constructed a reasonable set of monetary policy shocks then including them in a small vector autoregression var should help to identify other structural shocks that affected the united states economy during their sample period using a sample period of 1971 01 1996 12 we are easily able to identify both an aggregate demand ad shock and an aggregate supply as shock without imposing any sign or long run restrictions we present historical decompositions that allow us to compare the relative importance of these shocks with that of the exogenous monetary policy shocks in explaining output fluctuations during the 1973 1975 1980 1984 and 1990 1991 business cycle episodes

monthly pass through ratios abstract this paper estimates monthly pass through ratios from import prices to consumer prices in real time conventional time series methods impose restrictions to generate exogenous shocks on exchange rates or import prices when estimating pass through coefficients instead our estimation strategy follows an event study approach based on monthly releases in import prices projections from a dynamic common factor model with daily panels before and after monthly releases of import prices define the innovation for import prices we apply our identification procedure to swiss prices and find strong evidence that the median of the monthly pass through ratio is around 0 3 tests show that standard assumptions of non real time data and limited information breath are critical for the pass through estimates

the effects of foreign exchange movements on u s domestic prices this paper draws on the fields of international economics and industrial organization to model and empirically examine the relationship between currency value fluctuations and domestic producer prices the major focus is the issue of whether and why domestic industries differ systematically in their response to exchange rate changes the major findings are that changes in the external value of the u s dollar between 1974 and 1987 passed most fully into domestic prices of industries heavily reliant on imported inports and producing goods highly substitutable for imports highly capital intensive and concentrated industries and those protected by extensive barriers to entry both from domestic and foreign sources have exhibited less domestic price change from the exchange rate movements copyright 1989 by mit press

low inflation pass through and the pricing power of firms abstract recently there has been a significant decline in the degree to which firms pass through changes in costs to prices a decline that is frequently characterized as a reduction in the pricing power of firms the decline appears to be associated with the decline in inflation in many countries the decline has important implications for monetary policy because it affects both forecasts of inflation and the effects of changes in monetary policy on inflation some have argued that the decline in pricing power helped to keep inflation low in the face of apparently strong demand pressures in the united states in the late 1990s this paper puts forth the view that the decline in pass through or pricing power is due to the low inflation environment that has recently been achieved in many countries first a microeconomic model of price setting is used to show that lower pass through is caused by lower perceived persistence of cost changes evidence is then presented showing that inflation is positively correlated with persistence of inflation suggesting that the low inflation itself has caused the low pass through an economy wide model consistent with the micromodel is then presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways but can disappear quickly if monetary policy and expectations change

the empirical role of the exchange rate on the crude oil price formation this paper adopts a novel empirical approach to the crude oil price formation for the purpose of understanding the price reactions of opec member countries to changes in the exchange rate of the us dollar against other major currencies and prices of other members the results are broadly consistent with the view of the absence of a unified opec determined price in the international crude market literature in addition the results also highlight a cross regional dimension of the crude oil market

the choice of exchange rate index and domestic price passthrough this paper finds that the extent of real appreciation and real depreciation in the external value of the dollar since the late 70s has been overstated for most industries by the federal reserve board s 10 country index and is better proxied by the dallas fed s 101 country index earlier findings seem robust to the choice of index namely changes in the real external value of the dollar have passed most fully into domestic prices of industries heavily reliant on imported inputs and producing import substitutes and least fully into capital intensive and concentrated industries and those protected by entry barriers copyright 1991 by blackwell publishing ltd

exchange rates and import prices for a small open economy the case of ireland as a further contribution to the growing international literature on exchange rate pass through pt this study assesses the extent of pt for irish import prices over the period 1963 to 1995 it fills two important gaps in the literature by making due allowance for the time series properties of the data and by concentrating on the case of a small open economy in order to assess the extent of pt a mark up model for aggregate import unit values is employed it is argued that the usual single equation mark up estimation technique leads to seriously biased and inefficient estimates of the degree of pt as it ignores the strong simultaneity of import prices and domestic competing prices this study makes use of the johansen technique to allow for such simultaneity and uncovers two long run equilibrium relationships among the data for import unit values and domestic competing prices and confirms the existence of very close to full pt for both previous results in the literature demonstrating substantially

the demand side of social protection lessons from cambodia s labour rights experience summary in fragile states recent efforts to advance the social protection agenda have focused primarily on loosening supply side constraints but the resulting kaleidoscope of donor driven projects has often overlooked the need to create a sense of ownership by beneficiaries in part this is because it is unclear what political and social structures effectively facilitate activism in situations where state society relations are contentious we use cambodia s unusual success creating and sustaining a labor rights regime to illustrate the dynamics behind one type of social regime change that has opened up governance over worker protections in a sustainable and potentially replicable way

exchange rate pass through abstract the pass through relationship between exchange rate and prices of manufactured exports is examined for korea it is found that exporters take competitors prices at the prime mover of price setting and let profits bear the brunt of adjustment to the exchange rate changes

the adjustment of global external balances does partial exchange rate pass through to trade prices matter abstract this paper assesses whether partial exchange rate pass through to trade prices has important implications for the prospective adjustment of global external imbalances to address this question we develop and estimate an open economy dsge model in which pass through is incomplete due to the presence of local currency pricing distribution services and a variable demand elasticity that leads to fluctuations in optimal markups we find that the overall magnitude of trade adjustment is similar in a low and high pass through environment with more adjustment in a low pass through world occurring through movements in the terms of trade rather than real trade flows and through a larger response of the exchange rate

export price responses to exogenous exchange rate movements the export price responses to three different exogenous exchange rate movements are investigated using data on swedish exports of automobiles and kraft paper to three destination countries a pric

do measures of monetary policy in a var make sense no in many vector autoregressions vars monetary policy shocks are identified with the least squares residuals from a regression of the federal funds rate on an assortment of variables such regressions appear to be structurally fragile and are at odds with other evidence on the nature of the u s federal reserve s reaction function furthermore the residuals from these regressions show little correlation across various vars or with funds rate shocks that are derived from forward looking financial markets my results provide a sharp critique of current monetary vars

pathology of path dependency the ilo and the challenge of new governance using archival sources the authors study strategic and organizational change in the international labour organization ilo over the last twenty years they focus specifically on the ilo s efforts to incorporate certain elements of the new governance model into its policies and organizational practices which include the shift from standards expressed as detailed legal norms to soft law the active involvement of civil society organizations other than trade unions and employer associations in regulatory activities and the introduction of quantitative indicators of compliance with labor standards they argue that the efforts of the ilo leadership have been waylaid by the organization s corporatist structure which gives employer associations and trade unions veto power over policy developments at a time in which these actors are increasingly unable to agree on concrete policy measures finally the authors ask whether this corporatist structure accurately reflects the ilo s self defined mission prov

term structure views of monetary policy under alternative models of agent expectations abstract term structure models and many descriptions of the transmission of monetary policy rest on the empirical relevance of the expectations hypothesis small differences in the perceived policy reaction function in var models of agent expectations strongly influence the relevance in the transmission mechanism of the expected short rate component of bond yields mean reverting or difference stationary characterizations of interest rates require large and volatile term premiums to match the observable term structure however short rate descriptions that capture shifting perceptions of long horizon inflation evident in survey data support a more substantial term structure role for short rate expectations

exchange rate pass through in u s manufacturing industries this paper studies exchange rate pass through in u s manufacturing industries and its cross sectional variation through an adapted dixit stiglitz model of product differentiation the paper predicts that pass through is positively related to the degree of product differentiation and inversely related to the elasticity of marginal cost with respect to output empirical estimates of the pass through elasticities show that pass through is incomplete and varies across industries the degree of pass through is found to be positively correlated to different proxies for product differentiation and negatively to a proxy for the elasticity of marginal cost

exchange rate adjustment and oligopoly pricing behaviour this paper sets out a general theoretical structure for analyzing price adjustments to cost changes within asymmetric oligopolistic markets the theory implies that contrary to the usual assumption exchange rate changes may leave prices unaltered this is explored by an empirical examination of the european car market intracountry changes in car prices and the huge differences in u k and european car prices are both examined the empirical results are in line with the theoretical implications changes in relative supply costs are more likely to be converted into changes in price cost margins than prices within a national oligopolistic market copyright 1989 by oxford university press

pass through in dollarized countries should ecuador abandon the us dollar in this article we examine the convenience of dollarization for ecuador today as ecuador is strongly integrated financially and commercially with the united states the exchange rate pass through should be zero however we sustain that rising rates of imports from trade partners other than the united states and subsequent real effective exchange rate depreciations are causing the pass through to move away from zero here in the framework of the vector error correction model we analyse the impulse response function and variance decomposition of the inflation variable we show that the developing economy of ecuador is importing inflation from its main trading partners most of them emerging countries with appreciated currencies we argue that if ecuador recovered both its monetary and exchange rate instruments it would be able to fight against inflation we believe such an analysis could be extended to other countries with pegged exchange rate regimes

external adjustments and exchange rate flexibility some evidence from u s data this paper examines the role of the exchange rate in u s external adjustments the results show that the exchange rate is an important transmission channel of influence on prices and with longer lags on income and the trade balance the effects of the exchange rate and relative prices on the trade balance are not symmetric even in the long run exchange rate feedback is insignificant and makes little difference in trade balance adjustment there are also indications that the response of relative prices to the exchange rate shifted in recent years such changes seem to help explain the persistence of the u s trade deficit in recent years for multilateral trade but not bilateral trade with japan or germany copyright 1991 by mit press

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

sources of fluctuations in real and nominal exchange rates this paper attempts to distinguish empirically real versus nominal sources of fluctuations in real and nominal exchange rates the distinction is obtained by imposing the following restriction on the bivariate vector autoregression of real and nominal exchange rates over the current flexible rate period nominal shocks are required to have no permanent effect on the level of the real exchange rate given this identification scheme the author analyzes the dynamic effects and relative importance of real and nominal shocks with regards to exchange rates the findings indicate that real shocks dominate nominal shocks for both exchange rate series over short and long frequencies copyright 1992 by mit press

short term variations and long term dynamics in commodity prices in this article we develop a two factor model of commodity prices that allows meanreversion in short term prices and uncertainty in the equilibrium level to which prices revert although these two factors are not directly observable they may be estimated from spot and futures prices intuitively movements in prices for long maturity futures contracts provide information about the equilibrium price level and differences between the prices for the short and long term contracts provide information about short term variations in prices we show that although this model does not explicitly consider changes in convenience yields over time this short term long term model is equivalent to the stochastic convenience yield model developed in gibson and schwartz 1990 we estimate the parameters of the model using prices for oil futures contracts and apply the model to some hypothetical oil linked assets to demonstrate its use and some of its advantages over the gibson schwartz model

optimal inventory policies when purchase price and demand are stochastic in this paper we consider the problem of a firm that faces a stochastic poisson demand and must replenish from a market in which prices fluctuate such as a commodity market we describe the price evolution as a continuous stochastic process and we focus on commonly used processes suggested by the financial literature such as the geometric brownian motion and the ornstein uhlenbeck process it is well known that under variable purchase price a price dependent base stock policy is optimal using the single unit decomposition approach we explicitly characterize the optimal base stock level using a series of threshold prices we show that the base stock level is first increasing and then decreasing in the current purchase price we provide a procedure for calculating the thresholds which yields closed form solutions when price follows a geometric brownian motion and implicit solutions under the ornstein uhlenbeck price model in addition our numerical study shows that the optimal policy performs much better than inventory policies that ignore future price evolution because it tends to place larger orders when prices are expected to increase

a model of exchange rate pass through abstract exchange rate pass through is the phenomenon whereby changes in the value of foreign exchange are reflected in changes in import prices this paper presents a partial equilibrium model in which firms are price setters who anticipate exchange rate changes in equilibrium firms strategies incorporate expectations about the exchange rate consistently and are best responses to the strategies of all others in the world market it is shown that exchange rate changes give rise to import price changes but the degree of exchange rate pass through depends upon domestic and foreign market structures and the exchange rate regime in general exchange rate pass through is higher if the home market is monopolistic or if the foreign market is competitive

declining exchange rate pass through to u s import prices the potential role of global factors this paper documents a robust and sustained decline in exchange rate pass through to u s import prices from well above 0 5 during the 1970s and 1980s to around 0 2 over the last decade we attribute this decline to the rising prominence of competition from china a shift in import pricing behavior since the asian financial crisis and the reduced share of material intensive goods in u s imports we also find evidence that foreign exporters are increasingly setting their prices with an eye on u s prices these results in turn suggest a new and more general hypothesis linking the decline in pass through to the evolving nature of competition in global markets and structural changes in international production patterns

inventory control in a fluctuating demand environment we present an inventory model where the demand rate varies with an underlying state of the world variable this variable can represent economic fluctuations or stages in the product life cycle for example we derive some basic characteristics of optimal policies and develop algorithms for computing them in addition we show that certain monotonicity patterns in the problem data are reflected in the optimal policies

unfair trade the increasing gap between world and domestic prices in commodity markets during the past 25 years the early literature on international trade has debated extensively the constraints facing exporting countries in the major commodity markets this article goes one step further by suggesting that the final demand for these products can not have increased because the declines in world commodity prices were not transmitted or were transmitted imperfectly to domestic consumer prices in contrast upward movements in world prices were clearly passed on to domestic prices as a result the spread between world and domestic prices almost doubled in all major commodity markets during 1975 94 this asymmetry seldom discussed in the literature does not seem to be caused at least systematically by changes in trade and tax policies or factors such as transport processing and marketing costs this article argues therefore that a special effort should be made to better understand the transmission from world to domestic prices especially the role of large international trading companies that may have the capability to influence such spreads through one or several stages of processing in most major commodity markets

identifying sources of macroeconomic and exchange rate fluctuations in the uk abstract using quarterly data for the period 1985 1 2011 1 this paper uses a stylised open economy structural var model to identify the types of shocks responsible for macroeconomic fluctuations in the uk economy the stylised model implies a set of short run restrictions that allow for the identification of the shocks the importance of each shock is determined by examining forecast error variance decompositions impulse response functions and implied long run or permanent effects the results presented here imply that two shocks called the technology and is shocks are relatively more important than other shocks monetary shocks do exhibit long run monetary neutrality but clearly monetary policy is not responsible for a meaningful share of output and employment fluctuations during the sample period the estimated var and structural disturbances imply that the model accurately reflects the uk economy there is little evidence of a price puzzle or an exchange rate puzzle evidence against uncovered interest rate parity in response to an unexpected monetary policy tightening

what do the vars mean measuring the output effects of monetary policy abstract vars describe the history of output and other variables following monetary shocks to measure the effects of monetary shocks one must add economic identifying assumptions i specify the relative effects of anticipated and unanticipated money and i calculate how var based measures of the effect of money on output change as one varies this assumption the anticipated unanticipated assumption influences measured output effects as much or more than the variable selection and shock orthogonalization assumptions on which the var literature focuses assuming that anticipated monetary policy can have some effect on output results in much shorter smaller and perhaps more believable estimates of the output response to monetary shocks

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

a new look at pass through abstract this paper examines the relationship between exchange rates and prices rather than assuming exchange rate changes are exogenous shocks that affect prices i use a long run restrictions var to identify shocks and explore the way domestic prices import prices and exchange rates react to a variety of shocks consumer price pass through is nearly complete in response to some shocks but low in response to others alternatively import prices and exchange rates typically respond in the same direction and pass through seems quick this supports the idea that import prices are set in the producer s currency and that lower cpi pass through is a result of changes in quantities or margins further down the supply chain

do measures of monetary policy in a var make sense a reply to christopher a sims using the estimated var system one can trace out how monetary policy innovations affect the economy as john cochrane 1996 p 1 notes this literature has at last produced impulse response functions that capture common views about monetary policy for example in finding that a positive innovation to monetary policy is followed by increases in output prices and money and by a decline in the short term nominal interest rate in addition despite ongoing debates about precisely how the policy innovation should be identified the estimated responses of key macroeconomic variables to a policy shock are reasonably similar across a variety of studies and suggest that monetary policy shocks can have significant and persistent real effects

combining global and local forces the case of labor rights in cambodia summary an innovative policy experiment in cambodia links improvement of workers rights with increased orders and market access for the products of the country s garment factories the policy originated with the us cambodia textile agreement which awarded cambodia higher garment export quotas into the us market in return for improved working conditions and labor regulations it has continued even after the expiration of the global garment quota system at the end of 2004 the agreement s effectiveness has depended on the international labor organization acting as a compliance monitor and government intervention preventing some apparel producers from free riding on others improvements

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

exchange rate pass through in developing and emerging markets a survey of conceptual methodological and policy issues and selected empirical findings abstractglobal integration has increased the international linkages of financial markets for emerging market countries a key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices known as exchange rate pass through erpt this article reviews the conceptual methodological and policy issues connected with erpt in emerging market and developing countries and critically surveys selected empirical studies a key contribution is to categorise and compare the heterogeneous methodologies used to extract erpt measures in the empirical literature single equation models and systems methods are contrasted frequent misspecifications that produce unreliable erpt estimates are highlighted the discerning policy maker needs to ascertain by which methods erpt measures were calculated the controls and restrictions applied and the time frame and stability of the estimates

purchasing raw materials with uncertain fluctuating prices on identifie les differentes etapes de la decision d achat des matieres premieres ainsi que les differentes approches et les aptitudes requises on decrit plusieurs methodes et modeles proposes et appliques aux differentes etapes les aspects importants etant l inadequation des modeles de stocks classiques l application de la programmation lineaire au probleme de melange la prevision des prix a l aide de l econometrie et de l analyse des series temporelles et la prise de decision sequentielle pour l achat au jour le jour

symmetric pass through of tariffs and exchange rates under imperfect competition an empirical test abstract this paper examines the effect of tariffs and exchange rates on u s prices of japanese cars trucks and motorcycles in particular we test whether the long run pass through of tariffs and exchange rates are identical the symmetry hypothesis we find that this hypothesis is easily accepted in our sample we also find that the pass through relation varies across products ranging from about 0 6 for trucks to unity for motorcycles these coefficients have very different implications for trade policy we explain the results based on demand cost and institutional conditions in each industry

new directions for stochastic open economy models the paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages explicit solution of the wage setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare expected output and the expected terms of trade despite the potential interplay between imperfections due to sticky wages and monopoly the optimal monetary policy rule has a closed form solution to motivate our model we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local currency pricing 2000 elsevier science b v all rights reserved

improving social responsibility in rmg industries through a new governance approach in laws developing countries need to reform legislation to ensure the global supply firms in ready made garment rmg industry is adequately addressing obligations of social responsibility literature typically focuses on strategies for raising responsible standards in global buying firms within the rmg industry but fails to focus on implementing strategies for suppliers in developing countries this article addresses this gap by specifically focusing on the rmg industry in bangladesh the home of the third largest rmg supplier in the world it concentrates on analysing how and to what extent the law can assist in developing social responsibility performance of the rmg manufacturing firms in developing countries it ultimately concludes that a new governance approach in laws can effectively increase the social responsibility practice standards of an industry where global buying firms are profit driven and governmental agencies are either inadequate or corrupt

capacity reservation under spot market price uncertainty abstract capacity reservation contracts and spot markets are two alternative purchasing practices we focus on the cost effective management of the combined use of these two procurement sources due to the variability of the spot market prices and demand uncertainty the flexibility of combined sourcing can be advantageous spot market purchasing is a benefit in case of low spot market prices or insufficient reserved capacity and the capacity reservation contract is an operational risk hedging for high spot market price incidents the structure of the optimal combined purchasing policy is complex in this paper we consider a simple and easy to implement capacity reservation base stock policy and compare it to single sourcing options we examine the joint effect of demand and spot market price uncertainty our analysis shows that in the case of large spot market price variability the combined sourcing is superior over spot market sourcing even in the case of low average spot price the combined sourcing is also superior over long term sourcing even in the case of high average spot price if there is large spot market price variability analytical and simulation results are presented to show the effect of the different price cost and uncertainty parameters on the optimal capacity reservation base stock policy and on the expected percentage gain over single sourcing

monetary policy and long term interest rates in germany abstract in this paper we provide new empirical evidence on the relationship between short and long run interest rates for germany we find a positive correlation after a supply and demand shock and a negative correlation after a monetary policy shock this finding is consistent with the theory of ellingsen and soderstrom american economic review 2001 91 5 1594 1607

optimal commodity trading with a capacitated storage asset this paper considers the so called warehouse problem with both space and injection withdrawal capacity limits this is a foundational problem in the merchant management of assets for the storage of commodities such as energy sources and natural resources when the commodity spot price evolves according to an exogenous markov process this work shows that the optimal inventory trading policy of a risk neutral merchant is characterized by two stage and spot price dependent basestock targets under some assumptions these targets are monotone in the spot price and partition the available inventory and spot price space in each stage into three regions where it is respectively optimal to buy and inject do nothing and withdraw and sell in some cases of practical importance one can easily compute the optimal basestock targets the structure of the optimal policy is nontrivial because in each stage the merchant s qualification of high selling and low buying commodity prices in general depends on the merchant s inventory availability this is a consequence of the interplay between the capacity and space limits of the storage asset and brings to light the nontrivial nature of the interface between trading and operations a computational analysis based on natural gas data shows that mismanaging this interface can yield significant value losses moreover adapting the merchant s optimal trading policy to the spot price stochastic evolution has substantial value this value can be almost entirely generated by reacting to the unfolding of price uncertainty that is by sequentially reoptimizing a model that ignores this source of uncertainty

the dynamics of uncertainty or the uncertainty of dynamics stochastic j curves that the u s trade account will improve in response to a depreciation is not generally in doubt the key questions are by how much and by when addressing these questions involves studying the distribution of trade account responses to a depreciation given a depreciation of the dollar the paper generates this distribution by simulating a trade model with random drawings of both innovations and elasticity estimates unlike previous studies this analysis explains trade on a bilateral basis and uses the full information maximum likelihood estimator for parameter estimation according to the findings the dispersion of trade account responses grows over time and is directly related to the magnitude of the depreciation furthermore the probability of a slow adjustment of the trade account is relatively high and the 95 percent confidence intervals are too wide to be useful for policies that target a given trade account path copyright 1991 by mit press

exchange rate pass through at the product level we use a detailed database to investigate exchange rate pass through at the product level for a large number of countries the empirical analysis suggests that pricing behaviours are dichotomous with complete pass through in around 25 of sectors and significant pricing to market in the remaining ones average long run pass through coef ficient is close to 80 this result hides a strong heterogeneity of pass through behaviours across sectors even when composition effects are controlled for average pass through varies across importing countries the econometric analysis shows that pass through tends to be higher in volatile environments in less developed countries in weakly integrated markets jel classification f12 f31 f41

the links between international parity conditions and granger causality a study of exchange rates and prices this article investigates granger causality between exchange rates and prices for the us and four of its trading partners canada germany japan and the uk we emphasize the distinction between direct and indirect granger causality exchange rates directly cause prices if movements in exchange rates lead movement in prices and exchange rates indirectly cause prices if deviations from the purchasing power parity ppp condition can help forecast movement in prices but only by including the interest rate differential in our error correction model do we obtain results that align with economic theory the economic theory of ppp suggests that exchange rates and prices are cointegrated with exchange rates moving proportionally to prices in the long run in general we find either direct or indirect feedback mechanisms between exchange rates and prices

risk aversion in inventory management traditional inventory models focus on risk neutral decision makers i e characterizing replenishment strategies that maximize expected total profit or equivalently minimize expected total cost over a planning horizon in this paper we propose a framework for incorporating risk aversion in multiperiod inventory models as well as multiperiod models that coordinate inventory and pricing strategies we show that the structure of the optimal policy for a decision maker with exponential utility functions is almost identical to the structure of the optimal risk neutral inventory and pricing policies these structural results are extended to models in which the decision maker has access to a partially complete financial market and can hedge its operational risk through trading financial securities computational results demonstrate that the optimal policy is relatively insensitive to small changes in the decision maker s level of risk aversion

methodologies and perspectives in research on labour relations in global agricultural production networks a review the integration of global south actors into the global agricultural economy has attracted research on labour effects this is because global south actors are often integrated at the level of produc

exchange rate pass through and relative prices an industry level empirical investigation in this paper we explore the extent of exchange rate pass through for the usa uk and japan using a post bretton woods industry level dataset we investigate how different channels of exchange rate pass through affect domestic and import prices our analysis is suggestive of two channels of transmission and we find considerable variation in the extent of pass through across industries and countries

microeconomic implications of exchange rate variations this paper investigates the effect of exchange rate variations on the equilibrium of an industry in which domestic firms are competing with foreign suppliers the paper is designed as an expository survey it discusses the perfectly competitive industry exchange rate pass through under imperfect competition entry exit and hysteresis with fixed costs and exchange rate uncertainty copyright 1990 by oxford university press

cost pass through in the u s automobile market we study cost pass through in the u s automobile market using a framework that incorporates the effects of cost changes on input decisions we find that accounting for firms factor market decisions significantly increases measured cost pass through although we reject the hypothesis of full cost pass through and constant markups in addition our evidence suggests that cost shocks common to all manufacturers have a greater effect on prices than do model specific cost shocks finally we examine how pass through varies with manufacturer nationality finding that u s firm cost pass through exceeds that of european and asian firms

price adjustments by a gasoline retail chain we use daily data to examine price responses in the swedish gasoline market to changes in the rotterdam spot price exchange rates and taxes the distribution of price adjustments by a leading retail chain for the period january 1980 to december 1996 is symmetric with no small adjustments an error correction model shows that in the short run prices gradually move towards the long run equilibrium in response to cost shocks there is some evidence that also in the short run prices are stickier downwards than upwards prices respond more rapidly to exchange rate movements than to the spot market price our analysis emphasizes that to fully understand price adjustments it is necessary to examine data sets where the sample frequency at least matches that of price adjustments

exchange rate pass through in a small open economy the anglo irish case bilateral import unit values are constructed to investigate the extent and speed of exchange rate and production cost pass through into the unit values of irish imports total and sectoral from the uk using menon s 1996 mark up model the approach used to measure exchange rate pass through is based on cointegration and error correction modelling and the period of analysis is from 1979 to 1995 full pass through from the bilateral irish pound sterling exchange rate and from uk producer costs could not be rejected for total and sectoral import unit values for the sample period 1979q1 1995q4 this implies no role for domestic competing prices in explaining the long run relationship determining unit values of irish imports from the uk the results indicate that for aggregate and sectoral unit values of irish imports from the uk pass through is incomplete in the short run

stickiness synchronization and passthrough in intrafirm trade prices about forty percent of all u s international trades occurs between related parties or intra rm such as trades between a parent and subsidiary of the same multinational corporation this paper uses a transaction level dataset that distinguishes arm s length

revisiting the exchange rate pass through a general equilibrium perspective abstract a large literature estimates the exchange rate pass through to prices erpt using reduced form approaches whose results are an important input for central banks we show two shortcomings of these empirical measures for monetary policy analysis which are quantitatively important and may lead to imprecise and biased inflation predictions first while the literature describes a single erpt which we will label unconditional there are different erpt conditional on each shock that hits the economy second these crucially depend on expected monetary policy so that empirical erpt measures should not be taken as given in evaluating policy actions we use a simple model of a small and open economy to understand the intuition behind these two critiques showing that these results seem to hold under many alternative specifications we then highlight the quantitative relevance of these distinctions using a large scale dsge model of a small open economy

inventory models with random yield in a random environment abstract we consider a single item inventory model which is observed periodically in a randomly changing environment all model parameters are specified by the state of the environment which is assumed to be a time homogeneous markov chain yield is random due to the random capacity of the vendor i e a given order is fully received if the order quantity is less than this capacity otherwise the quantity received is equal to the available capacity the problem is analyzed in single multiple and infinite periods and it is shown that in all cases the optimal policy is the well known base stock policy where the optimal order up to level depends on the state of the environment the results are compared with the solutions of the certain yield model when there is infinite capacity we show that the order up to levels are equal in the single period case however in multiple and infinite periods we order the same or more if the yield is random

game theoretic models of mixed oligopoly abstract in this paper we review various models that have been proposed for the study of mixed oligopoly that is markets in which private and public firm compete on equal basis using only market instruments

an inventory model where customer demand is dependent on a stochastic price process abstract we investigate the optimal inventory operations of a firm selling an item whose price is driven by an exogenous stochastic price process which consequently impacts customer arrivals between ordering cycles this case is typical for retailers that operate in different currencies or trade products consisting of commodities or components whose prices are subject to market fluctuations we assume that there is a stochastic input price process for the inventory item which determines purchase and selling prices according to a general selling price function customers arrive according to a doubly stochastic poisson process that is modulated by stochastic input prices we analyze optimal ordering decisions for both backorder and lost sale cases we show that under certain conditions a price dependent base stock policy is optimal our analysis is then extended to a price modulated compound poisson demand case and the case with fixed ordering cost where a price dependent s s policy is optimal we present a numerical study on the sensitivity of optimal profit to various parameters of the operational setting and stochastic price process such as price volatility customer sensitivity to price changes etc we then make a comparison with a corresponding discrete time benchmark model that ignores within period price fluctuations and present the optimality gap when using the benchmark model as an approximation

long run price effects of exchange rate changes in finnish pulp and paper exports this paper presents long run exchange rate elasticities of finnish newsprint and pulp export prices in the united kingdom uk and germany over the period 1980 94 the elasticities were estimated for a markup pricing model using johansen s cointegration method the magnitudes of the elasticity estimates obtained by imposing price homogeneity indicate that pass through of exchange rate changes to export prices has been incomplete in both markets for newsprint the pass through elasticity was 0 60 in the uk and 0 46 in germany which means that about one half of the changes in the exchange rates is reflected in prices as expressed in the destination countries currencies and about a half in prices measured in finnish markka instead in pulp exports the pass through elasticities differed from each other between the two destination countries more clearly than in newsprint exports indicating a different pricing behaviour of finnish pulp exporters in the uk and germany when exchange rate changes pass throug

economic and social upgrading in global value chains and industrial clusters why governance matters the burgeoning literature on global value chains gvcs has recast our understanding of how industrial clusters are shaped by their ties to the international economy but within this context the role played by corporate social responsibility csr continues to evolve new research in the past decade allows us to better understand how csr is linked to industrial clusters and gvcs with geographic production and trade patterns in many industries becoming concentrated in the global south lead firms in gvcs have been under growing pressure to link economic and social upgrading in more integrated forms of csr this is leading to a confluence of private governance corporate codes of conduct and monitoring social governance civil society pressure on business from labor organizations and non governmental organizations and public governance government policies to support gains by labor groups and environmental activists this new form of synergistic governance is illustrated with evidence from recent studies of gvcs and industrial clusters as well as advances in theorizing about new patterns of governance in gvcs and clusters

pricing to market behaviour and exchange rate pass through in japanese exports this paper examines the relationship between exchange rate changes and japanese export pricing behavior employing a methodology which permits the separate measurement of pricing to market behavior and the cost impact of exchange rate changes the results suggest that incomplete pass through of exchange rate changes is a pervasive phenomenon but rejects the widely held view that japanese export firms have relied more heavily on pricing to market strategies during the period of yen appreciation in order to maintain market shares there is also evidence that estimates which capture only pricing to market behavior may over emphasise the degree of pass through to the extent that cost of production is sensitive to exchange rate changes copyright 1994 by royal economic society