Advanced Search
MyIDEAS: Login

The Exchange Rate Adjustment Role in Imperfect Competition: the Case of the Czech Republic

Contents:

Author Info

  • Filip Novotný

    ()
    (Czech National Bank)

Abstract

One of the approaches to an international trade analysis is the assumption of prevailing imperfect competition where monopolistic firms determine prices of their production on segmented foreign markets. Based on aggregate data of quarterly financial indicators of non-financial enterprises, the hypothesis was tested whether producers based in the Czech Republic absorb nominal exchange rate fluctuations in their profit margins. Estimated results indicate that domestic private firms absorb a substantial part of exchange rate fluctuations whereas the impact on firms under foreign control is ambiguous which implies application of optimization strategies in the case of multinational companies. These strategies are associated with pricing of intrafirm transactions. Tax optimization of multinational companies causes the dependence of the profitability of firms under foreign control on the level of effective taxation in EU countries. Both local-currency-pricing strategy (domestic private firms) and optimization strategies of multinational companies (firms under foreign control) lead to weakening of the exchange rate adjustment mechanism. In the case of small open economies, arguments in favor of a flexible exchange rate regime are therefore weakening with increasing globalization and imperfect competition in international trade.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.vsfs.cz/periodika/acta-2008-03.pdf
Download Restriction: no

Bibliographic Info

Article provided by University of Finance and Administration in its journal ACTA VSFS.

Volume (Year): 2 (2008)
Issue (Month): 1 ()
Pages: 38-55

as in new window
Handle: RePEc:prf:journl:v:2:y:2008:i:1:p:38-55

Contact details of provider:
Postal: Estonská 500/3, 101 00 Praha 10
Phone: (+420) 210 088 800
Fax: (+420) 271 741 597
Email:
Web page: http://www.vsfs.cz/
More information through EDIRC

Related research

Keywords: exchange rate; foreign market; imperfect competition; multinational company; pricingto- market; profit margin;

Find related papers by JEL classification:

References

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.:
as in new window
  1. Boris Hofmann, 2001. "The determinants of private sector credit in industrialised countries: do property prices matter?," BIS Working Papers 108, Bank for International Settlements.
  2. Michael B. Gordy, 2002. "A risk-factor model foundation for ratings-based bank capital rules," Finance and Economics Discussion Series 2002-55, Board of Governors of the Federal Reserve System (U.S.).
  3. John G. Cragg & Russell S. Uhler, 1970. "The Demand for Automobiles," Canadian Journal of Economics, Canadian Economics Association, vol. 3(3), pages 386-406, August.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:prf:journl:v:2:y:2008:i:1:p:38-55. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helena Hakenova).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.