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Implications of production sharing on exchange rate pass-through

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Author Info
Amit Ghosh (Department of Economics, Illinois Wesleyan University, USA)
Abstract

This paper presents a theoretical model to analyse exchange rate pass-through when there is cross-border production sharing. With production sharing, between two nations, we have pass-through at two different levels, one at the level of the imported parts and components used in making the final good and the other at the level of the final good. We find the higher the pricing-to-market at the intermediate good level, the lower the pass-through for the final good. The model is further extended to analyse three-country production sharing, substitution between two alternate sources of imported inputs. Finally, we draw some policy implications. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.374
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 14 (2009)
Issue (Month): 4 ()
Pages: 334-345
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Handle: RePEc:ijf:ijfiec:v:14:y:2009:i:4:p:334-345

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  1. Swenson, Deborah L., 2005. "Overseas assembly and country sourcing choices," Journal of International Economics, Elsevier, vol. 66(1), pages 107-130, May. [Downloadable!] (restricted)
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  2. Mahdavi, Saeid, 2002. "The Response of the US Export Prices to Changes in the Dollar's Effective Exchange Rate: Further Evidence from Industry Level Data," Applied Economics, Taylor and Francis Journals, vol. 34(17), pages 2115-25, November. [Downloadable!] (restricted)
  3. Yang, Jiawen, 1998. "Pricing-to-market in U.S. imports and exports: A time series and cross-sessional study," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 843-861. [Downloadable!] (restricted)
  4. Ware, Roger & Winter, Ralph, 1988. "Forward markets, currency options and the hedging of foreign exchange risk," Journal of International Economics, Elsevier, vol. 25(3-4), pages 291-302, November. [Downloadable!] (restricted)
  5. Aksoy, Yunus & Riyanto, Yohanes E, 2000. "Exchange Rate Pass-Through in Vertically Related Markets," Review of International Economics, Blackwell Publishing, vol. 8(2), pages 235-51, May. [Downloadable!] (restricted)
  6. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September. [Downloadable!] (restricted)
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  7. Jiawen Yang, 1992. "Exchange Rate Pass-Through in U.S. Manufacturing Industries," Working Papers 92-28, New York University, Leonard N. Stern School of Business, Department of Economics.
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  8. Kenneth A. Froot & Paul Klemperer, 1989. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2009-12-9.

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