This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Market Conduct, Price Interdependence and Exchange Rate Pass-Through

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Sophocles N. Brissimis () (Bank of Greece, Economic Research Department and University of Piraeus)
Theodora S. Kosma (Bank of Greece, Economic Research Department)

Additional information is available for the following registered author(s):

Abstract

This paper develops an international oligopoly model where foreign and domestic firms simultaneously choose their pricing strategies under the assumption of non-zero conjectural variations. The model captures the links between domestic and foreign producers’ prices and establishes a relationship between the price of domestically produced goods and the exchange rate, which appears to be important for the determination of exchange rate pass-through. It is also found that the equilibrium pass-through elasticity can be less than, equal to or greater than one depending on exporting and domestic firms’ conjectural variations. The empirical implications of the model are tested with the Johansen multivariate cointegration technique using data for Japanese firms’ exports to the US market. The results indicate that US producer prices are indeed influenced by the prices of their Japanese competitors and that the pass-through elasticity is less than one.

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 file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bankofgreece.gr/publications/pdf/Paper200651.pdf
File Format: application/pdf
File Function: Full Text
Download Restriction: no

Publisher Info
Paper provided by Bank of Greece in its series Working Papers with number 51.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 37 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:bog:wpaper:51

Contact details of provider:
Web page: http://www.bankofgreece.gr
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Pavlos Petroulas).

Related research
Keywords: Money demand Exchange rate pass-through Conjectural variations Translog expenditure function Multivariate cointegration

Other versions of this item:

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
F39 - International Economics - - International Finance - - - Other
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

This paper has been announced in the following NEP Reports:

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.:
  1. Gross, Dominique M. & Schmitt, Nicolas, 2000. "Exchange rate pass-through and dynamic oligopoly: an empirical investigation," Journal of International Economics, Elsevier, vol. 52(1), pages 89-112, October. [Downloadable!] (restricted)
    Other versions:
  2. Tange, Toshiko, 1997. "Exchange rates and export prices of Japanese manufacturing," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 195-206, April. [Downloadable!] (restricted)
  3. Athukorala, Premachandra & Menon, Jayant, 1994. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Economic Journal, Royal Economic Society, vol. 104(423), pages 271-81, March. [Downloadable!] (restricted)
  4. Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-87, August. [Downloadable!] (restricted)
  5. Bergin, Paul R. & Feenstra, Robert C., 2001. "Pricing-to-market, staggered contracts, and real exchange rate persistence," Journal of International Economics, Elsevier, vol. 54(2), pages 333-359, August. [Downloadable!] (restricted)
    Other versions:
  6. Feinberg, Robert M, 1986. "The Interaction of Foreign Exchange and Market Power Effects on German Domestic Prices," Journal of Industrial Economics, Blackwell Publishing, vol. 35(1), pages 61-70, September. [Downloadable!] (restricted)
  7. Adolfson, Malin, 1999. "Swedish Export Price Determination: Pricing to Market Shares?," Working Paper Series 96, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
    Other versions:
  8. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  9. Haskel, Jonathan & Scaramozzino, Pasquale, 1997. "Do Other Firms Matter in Oligopolies?," Journal of Industrial Economics, Blackwell Publishing, vol. 45(1), pages 27-45, March. [Downloadable!] (restricted)
    Other versions:
  10. Jacobson, Tor & Lyhagen, Johan & Larsson, Rolf & Nessén, Marianne, 2002. "Inflation, Exchange Rates and PPP in a Multivariate Panel Cointegration Model," Working Paper Series 145, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
    Other versions:
  11. Venables, Anthony J, 1990. "Microeconomic Implications of Exchange Rate Variations," Oxford Review of Economic Policy, Oxford University Press, vol. 6(3), pages 18-27, Autumn.
  12. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  13. Greenslade, Jennifer V. & Hall, Stephen G. & Henry, S. G. Brian, 2002. "On the identification of cointegrated systems in small samples: a modelling strategy with an application to UK wages and prices," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1517-1537, August. [Downloadable!] (restricted)
  14. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1997. "Structural Analysis of Vector Error Correction Models with Exogenous I(1) Variables," Cambridge Working Papers in Economics 9706, Faculty of Economics, University of Cambridge.
    Other versions:
  15. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
    Other versions:
  16. Hamid Faruqee, 2004. "Exchange Rate Pass-Through in the Euro Area: The Role of Asymmetric Pricing Behavior," IMF Working Papers 04/14, International Monetary Fund. [Downloadable!]
  17. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Blackwell Publishing, vol. 9(2), pages 197-231, June.
  18. Machin, Stephen & Van Reenen, John, 1993. "Profit Margins and the Business Cycle: Evidence from UK Manufacturing Firms," Journal of Industrial Economics, Blackwell Publishing, vol. 41(1), pages 29-50, March. [Downloadable!] (restricted)
  19. Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-45, December. [Downloadable!] (restricted)
  20. Olive, Michael, 2004. "Pricing behaviour in Japanese manufacturing: a comparative study," Japan and the World Economy, Elsevier, vol. 16(4), pages 417-429, December. [Downloadable!] (restricted)
  21. Feenstra, Robert C. & Gagnon, Joseph E. & Knetter, Michael M., 1996. "Market share and exchange rate pass-through in world automobile trade," Journal of International Economics, Elsevier, vol. 40(1-2), pages 187-207, February. [Downloadable!] (restricted)
    Other versions:
  22. Feinberg, Robert M, 1989. "The Effects of Foreign Exchange Movements on U.S. Domestic Prices," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 505-11, August. [Downloadable!] (restricted)
  23. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November. [Downloadable!] (restricted)
  24. Boyer, M. & Moreaux, M., 1982. "Consistent Versus Non-Consistent Conjectures in Duopoly Theory: Some Examples," Cahiers de recherche 8206, Universite de Montreal, Departement de sciences economiques.
    Other versions:
  25. Jiawen Yang, 1992. "Exchange Rate Pass-Through in U.S. Manufacturing Industries," Working Papers 92-28, New York University, Leonard N. Stern School of Business, Department of Economics.
    Other versions:
  26. Zhou, Su, 2003. "Interest rate linkages within the European Monetary System: new evidence incorporating long-run trends," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 571-590, August. [Downloadable!] (restricted)
  27. Thomas Klitgaard, 1999. "Exchange rates and profit margins: the case of Japanese exporters," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 41-54. [Downloadable!]
  28. Bernhofen, Daniel M. & Xu, Peng, 2000. "Exchange rates and market power: evidence from the petrochemical industry," Journal of International Economics, Elsevier, vol. 52(2), pages 283-297, December. [Downloadable!] (restricted)
  29. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 383-97, August.
    Other versions:
  30. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  31. Kikuchi, Ayumi & Sumner, Michael, 2002. "Exchange-Rate Pass-Through in Japanese Export Pricing," Applied Economics, Taylor and Francis Journals, vol. 34(3), pages 279-84, February. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Hiona Balfoussia, 2008. "An Affine Factor Model of the Greek Term Structure," Working Papers 72, Bank of Greece. [Downloadable!]
  2. Panagiotis Chronis & Aspassia Strantzalou, 2008. "Monetary and Fiscal Policy Interaction: What is the Role of the Transaction Cost of the Tax System in Stabilisation Policies?," Working Papers 71, Bank of Greece. [Downloadable!]
  3. Stephan Barisitz, 2008. "Banking Transformation (1989 - 2006) in Central and Eastern Europe - With Special Reference to Balkans," Working Papers 78, Bank of Greece. [Downloadable!]
  4. Peter Bernholz, 2008. "Government Bankruptcy of Balkan Nations and their Consequences for Money and Inflation before 1914: A Comparative Analysis," Working Papers 74, Bank of Greece. [Downloadable!]
Statistics
Access and download statistics

Did you know? A few items listed on IDEAS are over 2000 years old!

This page was last updated on 2008-9-30.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.