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Did the Strong Dollar Increase Competition in U.S. Product Markets?

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  • Knetter, Michael M
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    Abstract

    Sunk cost models of new trade theory have demonstrated that large, unanticipated swings in currency values can have permanent effects on trade flows by altering market structure in imperfectly competitive markets. The author tests an implication of these models using panel data on export unit values from Germany and Japan to a number of foreign markets, including the United States. He finds weak evidence in support of the thesis that U.S. product markets became more competitive as a result of the large dollar appreciation of the 1980s, although the results vary by industry and comparison country. Copyright 1994 by MIT Press.

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    Bibliographic Info

    Article provided by MIT Press in its journal Review of Economics & Statistics.

    Volume (Year): 76 (1994)
    Issue (Month): 1 (February)
    Pages: 192-95

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    Handle: RePEc:tpr:restat:v:76:y:1994:i:1:p:192-95

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    Web page: http://mitpress.mit.edu/journals/

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    Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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    Cited by:
    1. Sarno, Lucio & Taylor, Mark P. & Chowdhury, Ibrahim, 2004. "Nonlinear dynamics in deviations from the law of one price: a broad-based empirical study," Journal of International Money and Finance, Elsevier, Elsevier, vol. 23(1), pages 1-25, February.
    2. Juvenal Luciana & Taylor Mark P., 2008. "Threshold Adjustment of Deviations from the Law of One Price," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 12(3), pages 1-46, September.
    3. Michael M. Knetter, 1994. "Why are Retail Prices in Japan so High?: Evidence from German Export Prices," NBER Working Papers 4894, National Bureau of Economic Research, Inc.
    4. Knetter, Michael M., 1997. "Why are retail prices in Japan so high? Evidence from German export prices," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 15(5), pages 549-572, August.
    5. Luciana Juvenal & Mark P. Taylor, 2007. "The Law of One Price: Nonlinearities in Sectoral Real Exchange Rate Dynamics," Money Macro and Finance (MMF) Research Group Conference 2006, Money Macro and Finance Research Group 80, Money Macro and Finance Research Group.
    6. Phillip Swagel, 1995. "Import prices and the competing goods effect," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 508, Board of Governors of the Federal Reserve System (U.S.).
    7. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Tariffs, quotas and terms-of-trade: The case of New Zealand," Journal of International Economics, Elsevier, Elsevier, vol. 46(2), pages 313-332, December.

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