Macroeconomics of international price discrimination
By: Giancarlo Corsetti, Luca Dedola.
Series: International finance discussion papers ;; no. 744; International finance discussion papers (Online) ;; no. 744.
Publisher: Federal Reserve Board
Published: 2002
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "This paper builds a baseline two-country model of real and monetary transmission under optimal international price discrimination.  Distributing traded goods to consumers requires nontradables; because of distributive trade, the price elasticity of export demand depends on the exchange rate.  Profit-maximizing monopolistic firms drive a wedge between wholesale and retail prices across countries.  This entails possibly large deviations from the law of one price and incomplete pass-through on import prices.  Yet, consistent with expenditure-switching effects, a nominal depreciation generally worsens the terms of trade.  Moreover, the exchange rate and the terms of trade can be more volatile than fundamentals.  For plausible ranges of the distribution margin, there can be multiple steady states, whereas large differences in nominal and real exchange rates across equilibria translate into small differences in consumption, employment and the price level.  Finally, we show that with competitive goods markets international policy cooperation is redundant even under financial autarky"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 10/8/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.