Exchange Rate Pass-Through and Dynamic Oligopoly: An Empirical Investigation
April 1, 1999
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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.
Subject: Asset prices, Currencies, Exchange rate adjustments, Exchange rate pass-through, Exchange rates, Foreign exchange, Money, Prices
Keywords: Asset prices, B. price rivalry, C. price dynamics, cost effect, cost model, cost variation, Currencies, exchange rate, Exchange rate adjustments, Exchange rate pass-through, Exchange rates, exogenous cost variable, interdependence matter, International trade, Oligopoly, price change, price decision, price effect, price interdependence, price series, WP
Pages:
33
Volume:
1999
DOI:
Issue:
047
Series:
Working Paper No. 1999/047
Stock No:
WPIEA0471999
ISBN:
9781451846621
ISSN:
1018-5941
