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We survey the recent empirical and theoretical developments in the literature on the relation between prices and exchange rates. After updating some of the major findings in the empirical literature, we present a simple framework to interpret this evidence. We review theoretical models that...
Persistent link: https://www.econbiz.de/10014025379
The theoretical literature on pricing-to-market has identified two possible reasons why the elasticity of prices to exchange rate changes may be asymmetric across appreciations and depreciations. If firms are attempting to increase market shares in foreign markets subject to the possibility of...
Persistent link: https://www.econbiz.de/10013124599
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The closed and open economy literatures work on evaluating the role of real rigidities, but in parallel. This paper brings the two literatures together. We use international price data and exchange rate shocks to evaluate the importance of real rigidities in price setting. We show that...
Persistent link: https://www.econbiz.de/10013142536
When comparing the price of an individual good or service across different countries, it is necessary to use to a common metric. In reporting the prices of telecommunications services, the OECD converts prices into U.S. dollars using the Purchasing Power Parity (PPP) exchange rate, which takes...
Persistent link: https://www.econbiz.de/10013146484
This paper explores the relationship between exchange rate pass-through and market share for monopolistically competitive exporters. Under fairly general assumptions we show that pass-through should be high for exporters based in a country with a very large share of total destination market...
Persistent link: https://www.econbiz.de/10013309229
. Our theory implies a connection between the estimated risk premium equation, and the influence of exchange rate volatility … covering. By taking account of forward covering, we are able to derive an expression for the risk premium in the foreign … on export prices. In particular, we argue that if there is no risk premium, then exchange rate variance can only have a …
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