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! ]

Flexible Exchange Rates and Traded Goods Prices: A Theory of the Short-Run

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jayant Menon

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

Abstract

The volatility displayed by floating exchange rates has revived interest in the relationship between exchange rates and traded goods prices. This paper aims to provide a theory of exchange rates and traded goods prices in the short-run. In particular, it examines how various factors can cause exchange rate pass-through to be incomplete in the short-run but not in the long-run. These include: (i) menu costs, (ii) the costs of changing supply, (iii) the dynamics of demand response to price changes, (iv) order-delivery lags, (v) forward exchange cover, and (vi) the currency denomination of trade contracts. From a policy perspective, the presence of these factors could account for the often prolonged adjustment of trade balances to exchange rate changes, and the failure of exchange rate volatility to perceptibly affect the volume of international trade flows.

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.

File URL: http://www.monash.edu.au/policy/ftp/workpapr/g-108.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Monash University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-108.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Jun 1994
Date of revision:
Handle: RePEc:cop:wpaper:g-108

Contact details of provider:
Postal: 11th Floor, Menzies Building, Wellington Road, Clayton, Victoria, 3168
Phone: 03 9905 2398
Fax: 03 9905 2426
Web page: http://www.monash.edu.au/policy/index.htm
More information through EDIRC

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

Related research
Keywords:

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. 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)
  2. Krugman, Paul, 1980. "Vehicle Currencies and the Structure of International Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 513-26, August. [Downloadable!] (restricted)
    Other versions:
  3. Mussa, Michael, 1981. "Sticky Prices and Disequilibrium Adjustment in a Rational Model of the Inflationary Process," American Economic Review, American Economic Association, vol. 71(5), pages 1020-27, December. [Downloadable!] (restricted)
  4. Richard Baldwin, 1988. "Hysteresis In Import Prices: The Beachhead Effect," NBER Working Papers 2545, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Helen B. Junz & Rudolf R. Rhomberg, 1973. "Price competitiveness in export trade among industrial countries," International Finance Discussion Papers 22, Board of Governors of the Federal Reserve System (U.S.).
  7. Dixit, Avinash K, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 205-28, May. [Downloadable!] (restricted)
  8. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June. [Downloadable!] (restricted)
    Other versions:
  9. 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.
  10. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
    Other versions:
  11. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 529-38, May. [Downloadable!] (restricted)
  12. Kravis, Irving B. & Lipsey, Robert E., 1978. "Price behavior in the light of balance of payments theories," Journal of International Economics, Elsevier, vol. 8(2), pages 193-246, May. [Downloadable!] (restricted)
    Other versions:
  13. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Blackwell Publishing, vol. 9(2), pages 197-231, June.
  14. Sven W. Arndt & J. David Richardson, 1988. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Junz, Helen B & Rhomberg, Rudolf R, 1973. "Price Competitiveness in Export Trade Among Industrial Countries," American Economic Review, American Economic Association, vol. 63(2), pages 412-18, May. [Downloadable!] (restricted)
  16. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? Apart from a small start up grant in the 1990's, RePEc has received no funding and lives on the help of volunteers.

This page was last updated on 2009-12-9.

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.