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Degree of Competition and Export-Production Relative Prices when the Exchange Rate Changes: Evidence from a Panel of Czech Exporting Companies

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Author Info

  • Jiri Podpiera
  • Marie Rakova

Abstract

In this paper we show the relevance of the degree of competition for inferences about changes in export-production relative prices when the nominal exchange rate changes. We devise a model for tradable goods that combines the market competition and the pricing-tomarket literature and we empirically document the contrast between perfectly and imperfectly competitive markets for the export-production relative price responses to exchange rate changes. When the macroeconomic view is taken, a change in the degree of competition in exports (a change in the average mark-up on exported products) alternates the reaction in relative prices and quantity exported and thus requires careful policy-related consideration.

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Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2006/10.

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Date of creation: Dec 2006
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Handle: RePEc:cnb:wpaper:2006/10

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Keywords: Degree of competition; exchange rate; pricing-to-market.;

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References

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  1. Martin Cincibuch & Jiri Podpiera, 2004. "Beyond Balassa - Samuelson: Real Appreciation in Tradables in Transition Countries," Working Papers 2004/09, Czech National Bank, Research Department.
  2. 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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Cited by:
  1. Jan Bruha & Jiri Podpiera & Stanislav Polak, 2007. "The Convergence of a Transition Economy: The Case of the Czech Republic," Working Papers 2007/3, Czech National Bank, Research Department.
  2. Bruha, Jan & Podpiera, Jirí, 2007. "Transition economy convergence in a two-country model: implications for monetary integration," Working Paper Series 0740, European Central Bank.
  3. Bruha, Jan & Podpiera, Jirí & Polák, Stanislav, 2010. "The convergence dynamics of a transition economy: The case of the Czech Republic," Economic Modelling, Elsevier, vol. 27(1), pages 116-124, January.
  4. Jan Bruha & Jiri Podpiera & Stanislav Polák, 2007. "The Convergence Dynamics of a Transition Economy," IMF Working Papers 07/116, International Monetary Fund.

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