Exchange Rate Volatility, Pricing to Market and Trade Smoothing

October 1, 1997

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Format: Chicago

Hamid Faruqee, and Peter B. Clark Exchange Rate Volatility, Pricing to Market and Trade Smoothing, (USA: International Monetary Fund, 1997) accessed September 19, 2024

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 investigates the consequences of exchange rate volatility on the variability of export prices and quantities in the presence of market segmentation and pricing to market. Firms stabilize destination prices through systematic price discrimination, limiting the degree of exchange rate pass-through. Consequently, the variability of exchange rates is not fully translated into prices and quantities at the point of destination. Empirical estimates using aggregate price data for the G-7 industrial countries show incomplete pass-through in variances, with considerable variation among these countries. U.S. industry specific data also indicate incomplete pass-through in most cases, with considerable variation across industries.

Subject: Currencies, Exchange rate adjustments, Exchange rates, Export prices, Import prices

Keywords: Aggregate demand, Destination price, Export price, Import price, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/126
Stock No:

WPIEA1261997
ISBN:

9781451936629
ISSN:

1018-5941

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