In this paper we develop and test two hypotheses about purchasing power parity (PPP) derived from the pricing behavior of profit- maximizing, exporting firms. The first is that changes in the price of traded goods relative to domestic substitutes, due to partial pass- through of exchange rates,...

In this paper we develop and test two hypotheses about purchasing power parity (PPP) derived from the pricing behavior of profit- maximizing, exporting firms. The first is that changes in the price of traded goods relative to domestic substitutes, due to partial pass- through of exchange rates,...

The pattern of international trade adjustment is affected by the continuing international role of the dollar and related evidence on exchange rate pass-through to prices. This paper argues that a depreciation of the dollar would have asymmetric effects on flows between the United States and its...

Exchange rates and international prices are endogenous – exchange rates influence export prices directly through the costs of intermediate imports, but import price inflation feeds back into the exchange rates indirectly through monetary policy. This paper shows how to quantify the causal...

This paper analyzes the impact of exchange rate fluctuations when they are only partially passed through to consumer prices. We show that an exchange rate depreciation does not necessarily have a beggar-thy-neighbor effect and may in fact have an opposite, or beggar-thyself, effect. The...

This paper analyzes the impact of exchange rate fluctuations when they are only partially passed through to consumer prices. We show that an exchange rate depreciation does not necessarily have a beggar-thy-neighbor effect and may in fact have an opposite, or beggar-thyself, effect. The...