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Pricing-to-Market and Exchange Rate Dynamics: A Primer

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  • Carlo Frenquelli

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    (Università degli Studi di Macerata)

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    Abstract

    This paper provides a graphical exposition for understanding Pricing-to-Market (PTM) from both the micro and macroeconomic points of view. In particular, the paper focuses on the microeconomic conditions necessary for firms to apply PTM, and on how monetary policy transmission mechanisms change when the economy is characterized by PTM, with special attention to its impact on exchange rates and other real variables. Finally, the paper attempts to determine whether, in presence of PTM, monetary policy is a beggar-thy-neighbor or prosper-thy-neighbor instrument.

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    File URL: http://www.rivistapoliticaeconomica.it/2006/nov_dic/pdf/Frenquelli_eng.pdf
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    Bibliographic Info

    Article provided by SIPI Spa in its journal Rivista di Politica Economica.

    Volume (Year): 96 (2006)
    Issue (Month): 6 (November-December)
    Pages: 105-143

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    Handle: RePEc:rpo:ripoec:v:96:y:2006:i:6:p:105-143

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    1. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
    2. 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.
    3. Paul R. Bergin & Robert C. Feenstra, . "Pricing To Market, Staggered Contracts, And Real Exchange Rate Persistence," Department of Economics 99-01, California Davis - Department of Economics.
    4. Lane, P, 1999. "The New Open Economy Macroeconomics: A Survey," Trinity Economics Papers, Trinity College Dublin, Department of Economics 993, Trinity College Dublin, Department of Economics.
    5. Charles Engel, 1992. "Real Exchange Rates and Relative Prices: An Empirical Investigation," NBER Working Papers 4231, National Bureau of Economic Research, Inc.
    6. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
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