This paper deals with the long lasting debate on the exchange rate shocks and price adjustments in a dynamic programming framework. We present a framework where firms face menu costs when they decide change their prices in a competitive environment. The main result of the paper is that band of inaction of price changes to exchange rate shocks widens the more competitive a domestic market is. This is a complementary result to both menu cost and Pricing to market debate. We argue that both arguments are correct and do not exclude eachother. Empirical evidence from magazines market is discussed.
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