sticky import prices and j curves we show that devaluations lead to a j curve when imported goods are durable and import prices adjust slowly to exchange rate changes the j curve effect is caused by intertemporal speculation as import prices are low relative to future prices immediately after a devaluation

state dependent pricing invoicing currency and exchange rate pass through abstract we analyze exchange rate pass through and volatility of import prices in a dynamic framework where firms are subject to menu costs and decide on price adjustments in response to exchange rate innovations the exchange rate pass through and import price volatility then depend on the invoicing currency in combination with functional forms of cost and demand functions in particular there is lower pass through less frequent price adjustments and lower price volatility when prices are set in the importer s currency than when prices are set in the exporter s currency

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

risk aversion exchange rate uncertainty and the law of one price insights from the market for online air travel tickets we argue that risk aversion driven by exchange rate uncertainty causes a wedge between the domestic and foreign prices of a homogeneous good we test our hypothesis using a unique micro data set from a market with minimum imperfections the empirical findings validate our hypothesis as accounting for exchange rate uncertainty we are able to explain a significant proportion of deviations from the law of one price overall our analysis suggests the possibility of a new solution to the purchasing power parity puzzles

conditional exchange rate volatility and the volume of foreign trade evidence from seven industrialized countries there has long been a concern over the volatility of exchange rates and their impact on the volume of foreign trade however very little attention has been paid to the choice of an appropriate volatility variable as well as the proper specification of the trade equation the sample standard deviation of the exchange rate has been used as a proxy for exchangerate uncertainty in empirical studies that examine the effects of exchange rate uncertainty on the volume of foreign trade see for example akhtar and hilton 1 and gotur 27 these studies have provided conflicting evidence on this issue it has been argued that use of the sample standard deviation is inappropriate because the empirical distribution of exchange rates is not normal 22 10 in this regard subsequent empirical research 12 36 40 41 11 has employed a moving standard deviation of the rate of change of the exchange rate as a proxy for exchange rate uncertainty chowdhury 11 obtained a clear pattern of results that support the hypothesis that the higher volatility of exchange rates led to a reduction in international trade transactions after the breakdown of the bretton woods system in march 1973 other studies have reported ambiguous results 2 the moving standard deviation used in these studies has been criticized in the literature for a ignoring relevant information on the random process generating exchange rates 18 b underestimating the effect of volatility on decisions 52 c distorting the measurement of the volatility variable by smoothing the series 9 and d injecting an element of arbitrariness into the calculation through decisions about the order m of the moving average 43 3

asymmetric exchange rate exposure theory and evidence abstract this paper tests the hypothesis that exchange rate exposure is asymmetric over appreciation depreciation cycles more specifically it investigates whether returns on nine sector indexes across four major countries are asymmetrically affected by exchange rate movements the results show that in several instances exposure is asymmetric asymmetries are found to be more pronounced in the financial and non cyclical sectors possible theoretical explanations are provided regarding the particular type of exposure found across sectors and countries

exchange rate pass through in south africa panel evidence from individual goods and services abstract this study estimates pass through for south africa using samples of final goods and services and homogenous imports estimated pass through to consumer goods prices is low roughly 16 per cent in the two years following an exchange rate change surprisingly it is somewhat higher for services deviations from long run ppp appear to disappear relatively quickly with a half life of about 16 months for imports pass through estimates are much higher averaging around 60 per cent but with wide source country variation finally there is virtually no support for a simple linear trend change in either pass through or in reversion to ppp during the sample

exchange rate pass through into import prices revisited what drives it a large sample of developed and emerging economies is utilized to investigate import exchange rate pass through panel models reveal that various economic aspects of the destination country can explain about one third of the total variation in pass through elasticities and the remaining variation comes largely in the form of unobserved country specific effects inflation exchange rate volatility openness and relative wealth play a clear role as drivers of emerging markets pass through whereas the output gap and protectionism appear influential more generally nonlinearity regarding large versus small changes in the exchange rate is quite pervasive our evidence challenges the widely held view that pass through has been universally falling in developed markets and that it is higher for emerging markets the economic drivers are shown to play a role as out of sample predictors of pass through the findings confirm pricing to market theories and have implications for the optimal conduct of monetary policy

pricing exports a cross country study abstract this paper applies cointegration and error correction analysis to estimate the long run steady state and short run dynamic relationships between the exchange rate and export prices in industrial and newly industrializing economies the data coherent analysis allowing the endogeneity of domestic cost and the exchange rate shows that the exchange rate has smaller effects on the export price than previous studies would indicate it contradicts some widely accepted relationships e g smaller more open countries have greater coefficients of pass through the results also exhibit important differences among the usa japan and germany in their export pricing behavior jel f30 f31

international competition and exchange rate shocks a cross country industry analysis of stock returns this article systematically examines the importance of exchange rate movements and industry competition for stock returns common shocks to industries across countries are more important than competitive shocks due to changes in exchange rates weekly exchange rate shocks explain almost nothing of the relative performance of industries using returns measured over longer horizons the importance of exchange rate shocks increases slightly and the importance of industry common shocks increases more substantially both industry and exchange rate shocks are more important for industries that produce internationally traded goods but the importance of these shocks is economically small for these industries as well economists journalists and politicians around the world argue that some of the industries in their country compete vigorously with the same industries in other countries and that exchange rate shocks affect their competitiveness in the united states it is routinely stated that some u s industries compete with japanese industries and that a depreciation of the yen is bad for these u s industries and good for the rival japanese industries if the yen falls trade tensions could intensify between the u s and japan as autos and machinery from japan gain a competitive edge 1 further the exchange rate literature shows that exchange rate shocks lead to persistent deviations from purchasing power parity 2 froot and klemperer 1989 and knetter 1989 1993 among others demonstrate that deviations from purchasing power parity lead to sharp changes in price markups and profit margins for exporters

the impact of exchange rate volatility on international trade reduced form estimates using the garch in mean model abstract in this paper we use a multivariate garch in mean model of the reduced form of multilateral exports to examine the relationship between nominal exchange rate volatility and export flows and prices the model imposes rationality on perceived exchange rate volatility unlike conventional two step strategies tests are performed for five industrialized countries over the post bretton woods era we find that the garch conditional variance has a statistically significant impact on the reduced form equations for all countries for most of the countries the magnitude of the effect is stronger for export prices than quantities in addition the estimated magnitude of the impact of volatility on exports is not robust to using the conventional estimation strategy jel f41 f31

balance of payments crises under inflation targeting abstract this paper analyzes a small open economy model under inflation targeting it shows why such a monetary regime is vulnerable to speculative attacks that take place over a short period rather than instantaneously the speed at which the regime collapses and the extent of reserve losses are increasing in the central bank s explicit or implicit commitment to intervene in the foreign exchange market attacks are therefore ranked from most to least severe as follows exchange rate targeting cpi inflation targeting domestic nontradables inflation targeting and money targeting under inflation targeting the size of the attack is increasing in the tradables consumption share

dynamic relations between international equity and currency markets the role of currency order flow previous research on the dynamic linkages between international financial markets focused on bivariate interequity or intercurrency relationships and do not allow a specific role for the currency or equity market respectively in this paper we hypothesize that there are important yet not well understood dynamic relationships between international equity and currency markets and these are driven by information spillover via the mechanism of currency order flow using a trivariate asymmetric garch framework we find that the relationships between equity and currency markets are significant bidirectional and pervasive these relationships which coexist with the relationships between u s and foreign equity markets are much stronger in the volatilities than in the means importantly we find strong support for our information spillover hypothesis where currency order flow is the economic mechanism by which information is transmitted

exchange rate hysteresis large versus small policy misalignments abstract using a monetary model in the spirit of dornbusch 1976 and a sunk cost model of trade hysteresis we show that a sufficiently large policy misalignment can induce hysteresis in the trade balance and thereby alter the steady state real exchange rate hence exchange rate dynamics are path dependent since hysteresis in our model can entail industrial dislocation and the scrapping of sunk assets we suggest that these factors constitute a welfare cost of large policy misalignments that have not been considered formally additionally since the long run exchange rate is path dependent standard empirical tests of exchange rate models may involve a misspecification

consumption government spending and the real exchange rate using panel structural var analysis and quarterly data from four industrialized countries we document that an increase in government purchases raises output and private consumption deteriorates the trade balance and depreciates the real exchange rate this pattern of comovement poses a puzzle for both neoclassical and keynesian models an explanation based on the deep habit mechanism is proposed an estimated two country model with deep habits is shown to replicate well the observed responses of output consumption and the trade balance and the initial response of the real exchange rate to an estimated government spending shock

the j curve a literature review due to lag structure currency devaluation is said to worsen the trade balance first and improve it later resulting in a pattern that resemble the letter j hence the j curve phenomenon since its introduction by magee in 1973 brooking papers on economic activity 1 pp 303 25 a large number of studies have attempted to test the phenomenon using different techniques and different model specifications the results are at best ambiguous and deserve to be collected together for the future generation of researchers and graduate students this paper fills such a vacuum in the literature by reviewing the j curve related empirical papers

the exchange rate and the u s wage process an intensive empirical investigation the u s wage growth slowdown since 1982 has generated a large controversy over its causes a hypothesis that has received extensive attention is based on international competitivene ss effects the evidence is mixed and several authors have proposed alternative hypotheses based on economic or noneconomic developments this paper addresses this issue and finds significant effects of international competition on wages in manufacturing services and total hourly private earnings an array of tests indicates that thes e results are robust but that the depreciation of the dollar after 198 5 has not had the large effects of the 1981 85 appreciation copyright 1993 by ohio state university 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 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

is price adjustment asymmetric evaluating the market share and marketing bottlenecks hypothesis abstract export price adjustment is asymmetric with respect to currency fluctuations in at least two circumstances if firms face capacity constraints in distribution networks or quantitative trade restrictions then pricing to market may be greater during depreciations of the exporter s currency if firms attempt to build market share subject to the threat of trade restrictions then pricing to market may be greater during appreciations of the exporter s currency this paper tests for asymmetries using panel data on german and japanese 7 digit industry exports the data seldom reject the hypothesis of a symmetric response of prices to exchange rates

exchange rate pass through evidence from aggregate japanese exports the pass through of exchange rate changes to prices has been the subject of both theoretical and empirical investigations much of the recent interest in pass through was stimulated by the unprecedented movements in the u s dollar during the 1980s and by the potential for these movements to have lasting consequences on the domestic economy still unresolved in these studies is whether pass through to the u s market has declined over the past decade and if so why possible explanations include e g a growing dependence on imports changes in the structure of competition in the u s market or even unfair practices by foreign firms this issue is crucial to evaluating the long term effects of recent movements in u s dollar exchange rates this paper seeks to shed light on these issues indirectly by focusing on the stability of pass through in aggregate japanese exports japan is an obvious case study both because of its increasing presence in world trade and because of the continuing concern expressed frequently in the popular press over the large and persistent bilateral trade imbalances between japan and her major trading partners especially the u s two general criticisms of empirical studies in this area are the poor quality of the data analyzed and the lack of formal justification for the empirical modeling strategies employed these problems are addressed in this study in two ways first the data set used represents a significant improvement over those employed in other aggregate analyses this data from the bank of japan is unique because it is available on a monthly basis and because export prices as opposed to unit values are reported in both domestic and contractual currencies thus the exchange rate measure this study uses corresponds exactly to the export bundle that is we do not use the trade weighted exchange rate index commonly employed in addition to aggregate export price data this data set also contains six sector specific price indexes which permits a comparison of aggregate results with those at the sector or industry level second the problem of dynamic specification is addressed by estimating each equation in error correction form this methodology has been advocated as a means of avoiding illusory

intertemporal substitution in imported durables abstract this paper analyzes the hitherto unexplored relation between expected exchange rates and import prices of durable goods the distinguishing feature of durable goods is their asset like quality implying that their current and future sales are substitutable durability induces intertemporal substitution hence expected exchange rates affect the current price of imported durables although the sign of the effect cannot be determined by theory only the evidence shows that an expected appreciation raises the current import price of durables

measuring the intensity of competition in export markets abstract this paper develops an approach to measuring the intensity of competition in international markets using readily available data on destination specific values and quantities of exports at the seven digit industry level the intensity of competition a group of exporters faces in a particular export market is measured by the residual demand elasticity the group faces this elasticity is identified by exchange rate shocks which rotate the supply relation of the source country export group relative to competitors located in other countries we apply this method to german exports of beer and us exports of linerboard paper the resulting estimates of market power appear to be plausible and consistent with other indicators of competition e g market shares the number of competitors providing support for the applicability of our framework in measuring competition in international markets

markup adjustment and exchange rate fluctuations evidence from panel data on automobile exports abstract this paper uses data on bilateral automobile export prices from the usa germany and japan to gauge the importance of markup adjustment driven by exchange rate movements across several destination markets we find that japanese exports are characterized by a high degree of markup adjustment designed to stabilize the price measured in the buyer s currency there is weak evidence for such behavior on the part of german exporters and no evidence of markup adjustment by us exporters where it exists markup adjustment tends to be highly persistent the dynamic pattern of markup adjustment is consistent with invoicing in the exporter s currency except for exports to the usa and canada

the response of domestic prices to expected exchange rates this article examines the recent u s price experience in response to the actual and anticipated rise and fall of the dollar and tests for determinants of the observed price effects an index of real exchange rate expectations is developed and used to explore its role in determining domestic producer prices actual and expected future real exchange rates are seen to have opposite impacts on domestic price determination at the industry level further the industry specific characteristics interact asymmetrically with actual and expected real exchange rate changes copyright 1992 by university of chicago press

price indices and nonlinear mean reversion of real exchange rates author affiliation jyh lin wu institute of economics national sun yat sen university kaohsiung 804 taiwan jlwu2 mail nsysu edu tw and the department of economics national chung cheng university chia yi 106 taiwan ecdjlw ccu edu tw corresponding authorpei fen chen department of international business and trade shu te university kaohsiung taiwan cpf mail stu edu tw acknowledgment we thank two anonymous referees for interesting and constructive comments on an earlier version of the paper any remaining errors are ours 1 introduction are price indices crucial for the existence of a nonlinear mean reversion of real exchange rates do prices or exchange rate adjustments dominate when deviations from purchasing power parity ppp occur is the half life implied by a nonlinear model reasonable the purpose of this article is to address the above three questions for the uk and new zealand over the period of recent float the ppp hypothesis has been one of the most intensive research issues in empirical international finance over the past two decades the rationale behind it is a simple arbitrage hypothesis which results in a linear adjustment of deviations from ppp and the stationarity of real exchange rates empirically existing evidence based on unit root tests provide mixed results for ppp abuaf and jorion 1990 mark 1990 o connell 1998a theoretically there are several reasons for the nonlinear adjustment of deviations from ppp such as the existence of market frictions or transaction costs sercu uppal and van hulle 1995 in addition models of pricing to market and exchange rate pass through give rise to impediments to goods arbitrage krugman 1987 froot and klemperer 1989 the implication is that the speed of adjustment of deviations from ppp depends on the magnitude of the deviations on the other hand the adoption of a price index is crucial in examining ppp several authors have argued that the consumer and producer price indices cpi and ppi respectively do not correspond to their theoretical counterparts and contain measurement errors and aggregation biases cheung and lai 1993 imbs et al 2005 in addition the commodity basket for cpi and ppi includes nontradable goods which impart a nonstationary component to real cpi or ppi exchange rates engel 1999 recently xu 2003 argues that the price index of traded goods tpi is the appropriate one for ppp since it reflects the behavior of arbitrage better than the cpi or ppi the purpose of this article therefore is to examine the nonlinear dynamics of tpi based real exchange rates several authors have applied a smooth transition autoregressive star model to capture the nonlinear dynamics of real exchange rates as it allows for a smooth adjustment between regimes michael nobay and peel 1997 taylor peel and sarno 2001 there are several reasons for us to apply a band threshold autoregressive tar instead of a star type model in our empirical analysis first our empirical evidence fails to reject the unit root hypothesis against the hypothesis of a nonlinear star stationary process based on the test provided by kapetanios shin and snell 2003 1 second the plots of cpi ppi and tpi based real exchange rates in figure 1 show that the tpi based real rate has the largest variation among these three real rates third our empirical evidence rejects the null hypothesis of linearity against tar type nonlinearity and supports the hypothesis that real exchange rates are tar type stationary figure 1 plots of real exchange rates for the uk and new zealand figure omitted see article image several empirical studies have applied a threshold type process to examine the nonlinear mean reversion of real exchange rates obstfeld and taylor 1997 o connell 1998b taylor 2001 sarno taylor and chowdhury 2004

forecasting system imbalance volumes in competitive electricity markets forecasting in power systems has been made considerably more complex by the introduction of competitive electricity markets furthermore new variables need to be predicted by various market participants this paper shows how a new methodology that combines classical and data mining techniques can be used to forecast the system imbalance volume a key variable for the system operator in the market of england and wales under the new electricity trading arrangements neta

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

price discrimination in the context of vertical differentiation an application to canadian wheat exports this study examines the ability of the canadian wheat board cwb to price discriminate in bread wheat exports this study models wheat as a vertically differentiated intermediate good and modifies the model of vertical differentiation by mussa and rosen to the realities of wheat import demand the conceptual model isolates the bases of price discrimination and demonstrates that the cwb s ability to exploit cost differences in pricing depends on the extent of the differentiation between canadian and u s wheat this model is implemented using monthly confidential price data provided by the cwb for exports to japan the united kingdom and two markets aggregating remaining exports through canada s west and east coasts for 1982 1994 the data indicate that the cwb charges different prices to different countries for wheat of the same grade and protein content results from the model indicate that the price difference between any two markets is not completely explained by elements of perfect competition however the evidence is mixed regarding the ability of the cwb to utilize all the instruments available to price discriminate thus the cwb s pricing strategy may be more complex and dynamic than the prescription for static producer surplus maximization derived in this study

exchange rate expectations and market shares abstract we consider an asymmetric duopoly comprised of a domestic and a foreign firm we derive optimal collusion equilibria and examine how market shares vary in response to changes in the exchange rate our analysis implies some surprising results first a temporary depreciation has a greater impact on market shares than a permanent depreciation second if the change in the expected future rates is of sufficient magnitude then the domestic firm s market share may decrease following a depreciation of the home currency a seemingly perverse effect 1997 elsevier science s a

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

international deviations from the law of one price the role of search frictions and market share this article examines the size and persistence of international deviations from the law of one price in an industry with search frictions cost differences lead foreign and domestic firms to price differently within countries when local firms are more common in each country there are large and persistent price differences across countries large and persistent changes in international relative costs lead to large and persistent changes in international relative prices dynamic considerations imply that the amount of a cost shock firms pass through to prices is u shaped in the market share of firms receiving the shock

imperfect competition and exchange rate pass through in the food processing sector imperfect competition has become an important dimension of international trade theory helpman and krugman product differentiation and economies of scale are explicitly incorporated in the new trade theory policy prescriptions following from these models hinge critically on underlying assumptions particularly the form of strategic firm behavior competitive cournot or bertrand unfortunately these models do not lend themselves easily to empirical testing also little empirical information exists on the strategic behavior of firms in international markets thus various models and tests on different aspects of imperfect competition in trade have been proposed and implemented one form of imperfect competition in international trade that has received attention re

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

exchange rate regimes and trade prices does the ems matter abstract the paper investigates the role of exchange rate regimes on the process of trade adjustment a two period model of a duopoly with consumer switching costs is constructed the perception of economic agents regarding exchange rate stability is explicitly introduced the model is tested using bilateral trade prices data for flows inside and outside the european monetary system ems results suggest that a system of pegged rates like the ems although helpful is not necessary to achieve a smooth process of trade adjustment rather than the type of exchange rate regime it appears that misalignment is the crucial factor

export subsidies and oligopoly with switching costs abstract i examine export policy using a two period model of oligopolistic competition with switching costs a switching costs model captures the idea that market share in one period affects profits and welfare in future periods if consumers are impatient firms and governments are patient and switching costs are significant then governments subsidize first period exports and tax second period exports otherwise governments tax exports in both periods although governments may subsidize first period exports each country is made worse off when both countries subsidize in addition firms dump p mc under conditions similar to those required for export subsidies

antidumping investigations and the pass through of antidumping duties and exchange rates comment well in excess of 100 percent based on their understanding of the us antidumping calculation however the hypothesis is based on an incorrect understanding of the antidumping calculation under us law when corrected for this error the hypothesis would lead to a prediction of simple 100 percent pass through at most dumping refers to selling a product in an export market at less than its normal value a benchmark that is most commonly based on sales in the domestic market of the same product antidumping laws set tariffs to offset the amount of dumping the excess of normal value over export price in us practice a dumping complaint is brought on behalf of an industry against rival imports with the cases defined by product and by country a successful case results in the potential imposition of antidumping duties over and above any normal tariffs an unsuccessful case results in no duties being imposed american antidumping law and practice have the somewhat unusual characteristic that anti dumping duties are estimated and used to set duty deposits for a forward looking period in an initial investigation then are recalculated and actually assessed for the same period now back ward looking in a later review with some variation the later review is typically completed about two years after the initial investigation the review sets a new deposit rate and a second review determines the actual assessment rate retrospectively this can be repeated indefinitely the ini tial duty estimate resulting in a deposit rate allows companies to modify their pricing behavior so as to affect the actual dumping duties that are later assessed blonigen and haynes exploit this characteristic of the us administration of its antidump ing law to examine the effects of the imposition of antidumping duties on the pass through to us pricing the dumping investigation and resulting deposit rate provide information that the company can use in its subsequent sales in order to reduce or eliminate its dumping liability in the eventual review by comparing the antidumping deposit rates with eventual us pricing the degree of pass through of antidumping deposits can be estimated and the effects on exchange rate pass through of a potential antidumping dumping duty can be studied here i focus on the factual underpinnings that lead to blonigen and haynes s pricing model rather than the empirical results that model predicts that the method by which the us department of commerce usdoc calculates ad duties will lead to pass through of estimated antidump ing duties at twice the level of those estimated duties if companies wish to eliminate the eventual dumping duties by studying the outcomes of a series of ad cases concerning steel from canada they conclude that pass through of estimated duties exceeds 160 percent broadly consistent with

price formation in an open economy theory and evidence for the united kingdom 1951 1991 price formation is an increasingly important part of modern macroeconomics however the empirical literature on price setting is diverse and confused this paper uses cointegration techniques to test theories of price setting on uk aggregate data for 1951 91 we find i domestic prices are determined by both domestic costs and world prices and ii at the macroeconomic level prices are related to marginal cost rather than average or normal cost

strategic flexibility and exchange rate uncertainty we examine the implications of exchange rate swings in international markets paying particular attention to the importance of firm flexibility we use the term flexibility to refer to the ease with which firms can respond to exchange rate swings there are two kinds of flexibility that we consider 1 flexibility in the timing of output and sales allocation decisions relative to the exchange rate realization and 2 flexibility in the number of sales outlets available to the firms we show that differing degrees of flexibility have important implications for equilibrium prices i e exchange rate pass through market shares and profits

is exchange rate pass through in pork meat export prices constrained by the supply of live hogs this paper investigates the effects of lags in production and marketing of agricultural products on exchange rate pass through erpt in export prices of processed agri food commodities the short run inelastic supply of agricultural goods such as grains and livestock is tied to processors export pricing decisions under certain marketing arrangements the impacts of pre determined supplies on the level of erpt can be measured by regressing export prices on a destination specific exchange rate but also on processed output and exchange rates in other export markets the theoretical predictions of the model are tested by investigating erpt in canadian pork export prices in the u s and japan the empirical methodology accounts for potential unit root and cointegration using a dynamic seemingly unrelated regression framework pre determined hog supplies have a statistically significant impact on erpt in the case of exports to japan the degree of misspecification involved with standard erpt equations is quite large as they fail to reject the null hypothesis of no erpt while significant erpt coefficients are found in the full system approach that accounts for production lags

how does a devaluation affect the current account abstract this paper explores how an exchange rate devaluation affects the current account in a sticky price inter temporal optimizing model the main issue addressed is how the features of international pricing affect the response of the current account when prices are all set in the producer s currencies the effect of a devaluation on the current account depends on the conventional marshall lerner conditions this is fundamentally an a temporal condition depending on the elasticity of substitution between home and foreign goods however when prices are all set in consumer s currencies the response of the current account depends upon the size of the inter temporal elasticity of substitution of consumption across time periods this represents an inter temporal condition when pricing to market is partial the effect of devaluation on the current account depends on the strength of the a temporal elasticity relative to the inter temporal elasticity

brics how important is the exchange rate pass through this paper analyses the exchange rate pass through erpt into domestic consumer prices in brics brazil russia india china and south africa countries from mid 1990s onwards by using three different econometric approaches i e the single equation approach the var approach and the time varying parameter approach it is also studied the role of macroeconomic determinants in erpt our results suggest that a erpt is higher for the emerging markets with mostly floating exchange rates brazil russia and south africa than for the other brics countries b exchange rate explains on average around the 40 of the price variance for brazil russia and south africa and c inflation volatility exchange rate volatility and openness seem to be the key macroeconomic determinants in brics countries

exchange rate pass through when market share matters the authors investigate the pass through from exchange rates to import prices when firms future demands depend on their current market shares they show that profit maximizing foreign firms may either raise or lower their dollar export prices when the dollar appreciates temporarily i e the pass through may be perverse and that current import prices may be more sensitive to expected future exchange rates than to current exchange rates they present evidence that suggests the behavior of expected future exchange rates may provide a clue to the puzzling recent behavior of u s import prices copyright 1989 by american economic association

money ontology and deception money is a status function this article works out the implications and consequences of that fact there are ten functions and features of money and a number of common mistakes and deceptions in the institution of money the most important of deceptions is the illusion that money in order to function must be backed by something

adjustment costs and pricing to market theory and evidence abstract this paper develops an adjustment cost model of pricing to market the model consists of a monopolist who supplies an identical nondurable good to two foreign markets it is shown that the degree of pricing to market increases with the relative importance of the transitory component in exchange rates customs data from 1978 through 1987 on u s and canadian imports of seven german commodities are used to estimate the model s parameters and test its over identifying restrictions

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

linear and nonlinear exchange rate exposure abstract this paper presents a new methodological approach to examine exchange rate exposure which takes account of the role of the market portfolio and macroeconomic variables in exposure regressions exchange rate regimes based on periods of depreciation and appreciation and nonlinear exposure within each regime we show that the stock market s own exposure to exchange rates should be taken into account before considering industry exposure in addition we adjust the exchange rate and the stock market for common economy wide factors that are unrelated to exchange rates within this framework we show that exposure to bilateral exchange rates is statistically and economically important and that industries with extensive international trade are more often exposed than industries with low levels of international trade the signs of exposure coefficients in each regime are consistent with the extent to which an industry exports we also show that nonlinear exposure is often statistically and economically significant interestingly there is little evidence that industries are exposed to a currency basket

a structural approach to identifying the sources of local currency price stability the inertia of the local currency prices of traded goods in the face of exchange rate changes is a well documented phenomenon in international economics this paper develops a structural model to identify the sources of this local currency price stability and applies it to micro data from the beer market the empirical procedure exploits manufacturers and retailers first order conditions in conjunction with detailed information on the frequency of price adjustments following exchange rate changes to quantify the relative importance of local non traded cost components markup adjustment by manufacturers and retailers and nominal price rigidities in the incomplete transmission of such changes to prices we find that on average approximately 60 of the incomplete exchange rate pass through is due to local non traded costs 8 to markup adjustment 30 to the existence of own brand price adjustment costs and 1 to the indirect strategic effect of such costs though these results vary considerably across individual brands according to their market shares

emerging floaters pass throughs and some new commodity currencies in spite of early skepticism on the merits of floating exchange rate regimes in emerging markets 8 of the 25 largest countries in this group have now had a floating exchange rate regime for more than a decade using parsimonious var specifications covering the period of floating exchange rates this study computes the dynamics of exchange rate pass throughs to consumer price indices we find that pass throughs have typically been moderate even though emerging floaters have seen considerable nominal and real exchange rate volatilities previous studies that set out to estimate exchange rate pass throughs ignored changes in policy regimes making them vulnerable to the lucas critique we find that within the group of emerging floaters estimated pass throughs are higher for countries with greater nominal exchange rate volatilities and that trade more homogeneous goods these findings are consistent with the pass through model of floden and wilander 2006 and earlier findings by campa and goldberg 2005 respectively furthermore we find that the indonesian rupiah the thai baht and possibly the mexican peso are commodity currencies in the sense that their real exchange rates are cointegrated with international commodity prices

do capital importing countries pay higher prices for their imports of goods abstract we examine the effects that a country s net capital flows have on the border prices that a country pays for its imports of goods using data from 2000 to 2009 for 11 euro area countries we utilize a pricing to market specification to study exporters pricing behavior to the rest of the countries in the sample at the industry level for 900 goods disseminated at the 4 digit standard international trade classification level this allows us to construct a panel dataset which contains observations across exporters importers industries and time we find a strong positive influence of the importing country s net capital inflows on the border prices of its imports of goods this result is robust across different specifications of the underlying model as well to different sample dis aggregations across types of capital flows product categories and exporters

why do the free trade gain numbers differ so much the role of industrial organization in general equilibrium a small general equilibrium model calibrated approximately to match the canadian tradeable goods sector is used to examine the implications of a range of assumptions about pricing behaviour and entry barriers for the impact of free trade with the united states it turns out that only a model with an extreme combination of non competitive product market and free entry as well as unexploited scale economies can generate substantial gains from free trade other assumptions modelled include monopolistic competition market share pricing an economist s model and a mainstream industrial organization approach the predicted welfare gains range from zero to more than 7 per cent of gnp pourquoi est ce que les evaluations numeriques des gains derives de l accord de libre echange different tellement le role de l organisation industrielle dans l analyse d equilibre g6neral l auteur utilise un petit modele d equilibre general calibre pour approximer le secteur canadien des biens echangeables avec l exterieur dans son analyse des implications d un ensemble de postulats quant a la tarification et aux barrieres a l entree sur l impact du libre echange avec les etats unis il appert que seul un modele impliquant une combinaison extreme de marches de produit non concurrentiels et d entree libre ainsi que d economies d echelle non exploitees peut engendrer des gains substantiels comme resultat du libre echange on examine aussi d autres postulats concurrence monopolistique tarification pour maintenir une part du marche un modele a saveur economiste et 1 approche standard d organisation industrielle les gains de bien etre qu on predit selon les postulats de base couvrent un eventail de zero a 7 pour cent du pnb

exchange rate misalignments in duopoly the case of airbus and boeing we examine the effect of exchange rate misalignments on competition in the market for large commercial aircraft this market is a duopoly where players compete in dollar denominated prices while one of them airbus incurs costs mostly in euros we construct and calibrate a simulation model to investigate how companies adjust their prices to deal with the effects of a temporary misalignment and how this affects profit margins and volumes we also explore the effects on the long run dynamics of competition we conclude that due to the duopolistic nature of the aircraft market airbus will pass only a small part of the exchange rate fluctuations on to customers through higher prices moreover due to features specific to the aircraft industry such as customer switching costs and learning by doing even a temporary departure of the exchange rate from its long run equilibrium level may have permanent effects on the industry