Adjustment costs and pricing-to-market theory and evidence
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Regime-dependent exchange-rate pass-through to import prices
2016, International Review of Economics and FinanceCitation Excerpt :A review of the theoretical literature shows that the presence of menu cost price adjustment, differences in market structure and demand curves, presence of hysteresis in trade, productivity differences among importing/exporting firms, strategic interactions, and the stance of monetary policy environment can lead to nonlinear and asymmetric responses in price to exchange rate changes.1 A partial list of studies that point nonlinear dynamics in ERPT includes Dornbusch (1987), Krugman (1987), Baldwin (1988), Knetter (1989), Froot and Klemperer (1989), Dixit (1989), Kasa (1992), Knetter (1991, 1993), Kogut and Kulatilaka (1994), Bergin and Feenstra (2001), Atkeson and Burstein (2008), Berman, Martin, and Mayer (2012), Sanyal and Jones (1982), Taylor (2000), Corsetti and Dedola (2008), Devereux and Yetman (2010), and Shintani, Terada-Hagiwara, and Yabu (2013).2 Although these studies do not directly imply the very specific nonlinear and asymmetric dynamics reported in this paper, they provide insights into why threshold effects and asymmetric responses are relevant and important for ERPT.
International Prices and Exchange Rates
2014, Handbook of International EconomicsCitation Excerpt :In response to a depreciation of the Euro against the U.S. dollar, a German exporter to the U.S. will not find it optimal to fully reduce its dollar price if there is no capacity to meet additional demand. This insight was initially developed in Krugman (1987) and later embedded in dynamic general equilibrium models by Kasa (1992) and Lapham (1995). In the previous sections we described mechanisms through which prices adjust incompletely and gradually to exchange rate shocks and generate relative price movements for the same good across different markets.
Declining exchange rate pass-through to U.S. import prices: The potential role of global factors
2007, Journal of International Money and FinanceCitation Excerpt :For instance, following a depreciation of the importing country's currency, a foreign exporter might cut its price in terms of its domestic currency so as to stabilize its price in terms of the importing country's currency. This action could be a defensive response to exchange rate moves that are perceived as temporary (Marston, 1990), or it might result from efforts to maintain market share (Hooper and Mann, 1989; Kasa, 1992). These papers, along with the influential work of Knetter (1989, 1993, 1995), provided the basis for the “pricing to market” hypothesis.
Firm specific pass through and heterogeneity
2023, Journal of Economics and FinancePass-through with volatile exchange rates and inflation targeting
2023, Review of World Economics
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This paper is based on chapter 2 of my dissertation, done in the Department of Economics at the University of Chicago. I would like to thank the members of my thesis committee, John Cochrane, Lars Hansen and John Huizinga for many helpful comments. I also received useful suggestions from Eric Fisher, Richard Highfield, David Papell, and two anonymous referees. Remaining errors and ambiguities are my responsibility.