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Goods Prices and Exchange Rates: What Have We Learned?

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Author Info
Pinelopi Koujianou Goldberg
Michael M. Knetter

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Abstract

Import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country. Recent research indicates that common-currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets. This evidence suggests that incomplete pass-through is a consequence of third-degree price discrimination. While distance matters for market segmentation, borders have independent effects. The source of the border effect has not been clearly identified. Furthermore, there is little evidence yet to suggest substantial market power is implied by the observed price discrimination.

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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 35 (1997)
Issue (Month): 3 (September)
Pages: 1243-1272
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Handle: RePEc:aea:jeclit:v:35:y:1997:i:3:p:1243-1272

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Shang-Jin Wei & David C. Parsley, 1995. "Purchasing Power Disparity During the Floating Rate Period: Exchange Rate Volatility, Trade Barriers and Other Culprits," NBER Working Papers 5032, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Kasa, Kenneth, 1992. "Adjustment costs and pricing-to-market theory and evidence," Journal of International Economics, Elsevier, vol. 32(1-2), pages 1-30, February. [Downloadable!] (restricted)
  3. Jose Campa & Linda S. Goldberg, 1993. "Investment in Manufacturing, Exchange-Rates and External Exposure," NBER Working Papers 4378, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March. [Downloadable!] (restricted)
  5. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-25, December. [Downloadable!] (restricted)
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  6. Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Kenneth A. Froot & Michael Kim & Kenneth Rogoff, 1995. "The Law of One Price Over 700 Years," NBER Working Papers 5132, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Giovannini, Alberto, 1988. "Exchange rates and traded goods prices," Journal of International Economics, Elsevier, vol. 24(1-2), pages 45-68, February. [Downloadable!] (restricted)
  9. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August. [Downloadable!] (restricted)
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  10. Charles Engel & John H. Rogers, 1996. "Regional patterns in the law of one price: the roles of geography vs. currencies," International Finance Discussion Papers 533, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  11. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July. [Downloadable!] (restricted)
  12. Kravis, Irving B & Lipsey, Robert E, 1977. "Export Prices and the Transmission of Inflation," American Economic Review, American Economic Association, vol. 67(1), pages 155-63, February. [Downloadable!] (restricted)
  13. Dennis W. Carlton, 1987. "The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable for Understanding Macroeconomics?," NBER Working Papers 2178, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier. [Downloadable!] (restricted)
  15. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300. [Downloadable!] (restricted)
  16. Sven W. Arndt & J. David Richardson, 1988. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November. [Downloadable!] (restricted)
  18. Sullivan, Daniel, 1985. "Testing Hypotheses about Firm Behavior in the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 586-98, June. [Downloadable!] (restricted)
  19. Stephen P. Magee, 1973. "Currency Contracts, Pass-Through, and Devaluation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1973-1), pages 303-325. [Downloadable!]
  20. Kenneth Rogoff, 1995. "What Remains of Purchasing Power Parity?," Boston University - Institute for Economic Development 54, Boston University, Institute for Economic Development.
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  21. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier. [Downloadable!] (restricted)
  22. Sumner, Daniel A, 1981. "Measurement of Monopoly Behavior: An Application to the Cigarette Industry," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1010-19, October. [Downloadable!] (restricted)
  23. Gron, Anne & Swenson, Deborah L, 1996. "Incomplete Exchange-Rate Pass-Through and Imperfect Competition: The Effect of Local Production," American Economic Review, American Economic Association, vol. 86(2), pages 71-76, May.
  24. Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, vol. 67(5), pages 942-48, December. [Downloadable!] (restricted)
  25. Lawrence Schembri, 1989. "Export Prices and Exchange Rates: An Industry Approach," NBER Chapters, in: Trade Policies for International Competitiveness, pages 185-216 National Bureau of Economic Research, Inc. [Downloadable!]
  26. Aw, Bee-Yan, 1993. "Price discrimination and markups in export markets," Journal of Development Economics, Elsevier, vol. 42(2), pages 315-336, December. [Downloadable!] (restricted)
  27. Gagnon, Joseph E. & Knetter, Michael M., 1995. "Markup adjustment and exchange rate fluctuations: evidence from panel data on automobile exports," Journal of International Money and Finance, Elsevier, vol. 14(2), pages 289-310, April. [Downloadable!] (restricted)
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  28. Pinelopi K. Goldberg & Michael M. Knetter, 1995. "Measuring the Intensity of Competition in Export Markets," NBER Working Papers 5226, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  29. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer. [Downloadable!] (restricted)
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