Exchange Rate Pass-Through and Dynamic Oligopoly : An Empirical Investigation

Author/Editor:

Dominique M. Gross ; Nicolas Schmitt

Publication Date:

April 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper explicitly takes into account the dynamic oligopolistic rivalry among source producers to evaluate the degree of exchange rate pass-through. Using recent time-series techniques for the case of imported automobiles in Switzerland, the results show that prices are strategic complements and that the degree of pass-through is lower in the long run than in the short run. We attribute this to the fact that, although some rivals match long-term price changes, others do not, inducing the producer who faces a change in exchange rate to absorb a greater proportion of the variation.

Series:

Working Paper No. 99/47

Subject:

English

Publication Date:

April 1, 1999

ISBN/ISSN:

9781451846621/1018-5941

Stock No:

WPIEA0471999

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

33

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