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Market Share and Exchange Rate Pass-through: Competition among exporters of the same nationality

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  • YOSHIDA Yushi

Abstract

Our dataset is unique and allows us to control for market share among competing exporters with the same nationality. Using a sample from January 1988 to December 2005 on exports of five Japanese major ports to six destination countries, we examine the effect of market share (with respect to competitors from the same country) on exchange rate pass-through (ERPT). We provide empirical evidence that market share among the same nationality on exchange rate pass-through matters and is consistent with the findings of Feenstra et al. (1996), which show a non-linear relationship between market share and exchange rate pass-through. The result remains robust when the market share of the country is also included in the regression. Quantifying the economic significance of the market share effect, our evidence shows that the shifts in the ERPT of Japanese exports are more pronounced in Asian countries whereas the ERPT has been relatively stable over the last two decades for the United States. Our evidence implies that Japanese exports do not account for the observed recent decline in the ERPT of U.S. imports whereas Japanese exports' ERPT declined more substantially in China.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13084.

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Length: 43 pages
Date of creation: Sep 2013
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Handle: RePEc:eti:dpaper:13084

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  1. Gottfries, N., 1999. "Market Shares, Financial Constraints, and Pricing Behavior in the Export Market," Papers 1999:15, Uppsala - Working Paper Series.
  2. Robert E. Lipsey & Linda Molinari & Irving B. Kravis, 1991. "Measures of Prices and Price Competitiveness in International Trade in Manufactured Goods," NBER Chapters, in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 144-199 National Bureau of Economic Research, Inc.
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  6. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
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  12. Feenstra, R.C. & Gagnon, J.E. & Knetter, M.M., 1993. "Market Share and Exchange Rate Pass-Through in World Automobile Trade," Papers 93-14, California Davis - Institute of Governmental Affairs.
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  18. Otani, Akira & Shiratsuka, Shigenori & Shirota, Toyoichiro, 2003. "The Decline in the Exchange Rate Pass-Through: Evidence from Japanese Import Prices," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(3), pages 53-81, October.
  19. Bouakez, Hafedh & Rebei, Nooman, 2008. "Has exchange rate pass-through really declined? Evidence from Canada," Journal of International Economics, Elsevier, vol. 75(2), pages 249-267, July.
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  21. Kenneth A. Froot & Paul Klemperer, 1989. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc.
  22. George Alessandria, 2004. "International Deviations From The Law Of One Price: The Role Of Search Frictions And Market Share," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1263-1291, November.
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