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Market Structure and Exchange Rate Exposure: The Case of Consumable Goods

Author

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  • Andrikopoulos, A.
  • Dassiou, X.

Abstract

We examine the impact of exchange rates on profits and prices in differentiated consumable goods markets. We model the exchange rate exposure of exporting firms operating within a Bertrand or a Cournot setting where between and within competition co-exist. We show that market structure and these two forces determine pass through and exposure. Empirical tests of real and bilateral exchange rate exposure using stock price and profit data confirm a link between the ability of a firm to pass on the exchange rate changes to its customers and the magnitude of the exposure on their rivals.

Suggested Citation

  • Andrikopoulos, A. & Dassiou, X., 2016. "Market Structure and Exchange Rate Exposure: The Case of Consumable Goods," Working Papers 16/12, Department of Economics, City University London.
    • Handle: RePEc:cty:dpaper:16/12
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    File URL: https://openaccess.city.ac.uk/id/eprint/16512/1/Dassiou%20-%20Economics-DP-16-12.pdf
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