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Inherited Dollarization: Persistence of US Dollar Pricing in Consumer Goods Markets

Author

Listed:
  • María Victoria Landaberry

    (Banco Central del Uruguay)

  • Miguel Mello

    (Banco Central del Uruguay)

Abstract

This is an empirical study of price setting dollarization in Uruguay using product level data. Using web scraping we developed a unique dataset for online e-commerce. We describe price setting in US dollars by categories, sub-categories and value of more than 9 million announcements for consumer goods. We conclude that dollarization is determined principally by the value and by the type of products. The persistence of dollarization in the used products market, is also determined by its value. These implies that high value goods are perceived as goods with a reserve of value by consumers, so they set the price of that residual value of second hand products in dollars. This result is in line with previous research on the cultural dollarization of Uruguayan consumers.

Suggested Citation

  • María Victoria Landaberry & Miguel Mello, 2019. "Inherited Dollarization: Persistence of US Dollar Pricing in Consumer Goods Markets," Documentos de trabajo 2019005, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2019005
    as

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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/5.2019.pdf
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    References listed on IDEAS

    as
    1. Bacchetta, Philippe & van Wincoop, Eric, 2005. "A theory of the currency denomination of international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 295-319, December.
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    3. Devereux, Michael B. & Engel, Charles & Storgaard, Peter E., 2004. "Endogenous exchange rate pass-through when nominal prices are set in advance," Journal of International Economics, Elsevier, vol. 63(2), pages 263-291, July.
    4. Gerardo Licandro & Miguel Mello, 2019. "Foreign currency invoicing of domestic transactions as a hedging strategy: evidence for Uruguay," Journal of Applied Economics, Taylor & Francis Journals, vol. 22(1), pages 622-634, January.
    5. Gerardo Licandro & Miguel Mello, 2017. "Foreign Currency Invoicing of Domestic Transactions as a Hedging Strategy Theory and Evidence for Uruguay," Documentos de trabajo 2017004, Banco Central del Uruguay.
    6. Gerardo Licandro & Miguel Mello, 2018. "Cultural and Financial Dollarization of Households in Uruguay," Investigación Conjunta-Joint Research, in: María José Roa García & Diana Mejía (ed.), Financial Decisions of Households and Financial Inclusion: Evidence for Latin America and the Caribbean, edition 1, volume 1, chapter 11, pages 349-385, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
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    9. Camila Casas & Mr. Federico J Diez & Ms. Gita Gopinath & Pierre-Olivier Gourinchas, 2017. "Dominant Currency Paradigm: A New Model for Small Open Economies," IMF Working Papers 2017/264, International Monetary Fund.
    10. Miguel Mello, 2017. "Derivatives and Exchange Rate Hedging Strategies in Uruguayan Firms," Documentos de trabajo 2017005, Banco Central del Uruguay.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    price setting; foreign currency; dollarization; Uruguay; web scraping; persistence; R; data analysis;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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