This paper estimates a pricing-to-market equation for Italy over the period 1990-99 with the aim of assessing the degree of exchange rate pass-through (ERPT). As compared to previous works, we minimize aggregation and selection biases using export data on all products (about 700 from 4 digits of SITC) and all destination markets (about 70). On average, ERPT is asymmetric: Italian exporters did not reduce their profit margins, and thus did not defend their market shares, when the Italian lira got appreciated (complete ERPT); on the contrary, they did raise margins – in the order of 30 per cent of the exchange rate variation – after a depreciation. Disaggregating in terms of destination markets and products, ERPT is incomplete when exports are directed to industrial countries and originate in oligopolistic industries, more precisely high-tech and economies of scale sectors. Despite large overlappings, the same results hold for industries where firms are bigger and more productive than average. Sales of traditional competitive products to non-industrial countries display an almost complete ERPT.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Find related papers by JEL classification: F14 - International Economics - - Trade - - - Country and Industry Studies of Trade F3 - International Economics - - International Finance L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports: