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Markup adjustment and exchange rate fluctuations: evidence from panel data on automobile exports

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  • Gagnon, Joseph E.
  • Knetter, Michael M.

Abstract

This paper uses bilateral automobile export unit values from the United States, Germany and Japan to measure the importance of markup adjustment that is associated with exchange rate changes across export destination markets. Japanese auto export prices exhibit a high degree of markup adjustment that has the effect of stabilizing prices in units of the buyer's currency. There is weak evidence of this behavior in German auto exports and none for U.S. auto exports. Where it exists, markup adjustment is very persistent, not merely a short run phenomenon. The dynamic pattern of adjustment is consistent with invoicing in the exporter's currency, except for exports to the United States and Canada.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 14 (1995)
Issue (Month): 2 (April)
Pages: 289-310

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Handle: RePEc:eee:jimfin:v:14:y:1995:i:2:p:289-310

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Web page: http://www.elsevier.com/locate/inca/30443

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References

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  1. 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.
  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.
  3. Joseph E. Gagnon, 1988. "Adjustment costs and international trade dynamics," International Finance Discussion Papers 321, Board of Governors of the Federal Reserve System (U.S.).
  4. Kenneth A. Froot & Paul Klemperer, 1989. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc.
  5. Feenstra, Robert C, 1988. "Quality Change under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 131-46, February.
  6. Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-29, May.
  7. 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.
  8. Bresnahan, Timothy F., 1981. "Departures from marginal-cost pricing in the American automobile industry : Estimates for 1977-1978," Journal of Econometrics, Elsevier, vol. 17(2), pages 201-227, November.
  9. 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.
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