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! ]
A framework for identifying the sources of local currency price stability with an empirical application Author info | Abstract | Publisher info | Download info | Related research | Statistics Pinelopi K. Goldberg
Rebecca Hellerstein
Additional information is available for the following
registered author(s):
The inertia of traded goods' local currency prices in the face of exchange rate changes is a well-documented phenomenon in the field of international economics. This paper develops a framework for identifying the sources of local currency price stability. The empirical approach exploits manufacturers' and retailers' first-order conditions, in conjunction with detailed information on the frequency of price adjustments in response to exchange rate changes, to quantify the relative importance of fixed costs of repricing, local-cost nontraded components, and markup adjustment by manufacturers and retailers in the incomplete transmission of exchange rate changes to prices. The approach is applied to micro data from the beer market. We find that (a) wholesale prices appear more rigid than retail prices; (b) price adjustment costs on average account for up to 0.5 percent of revenue at the wholesale level but only 0.1 percent of revenue at the retail level; (c) overall, 54.1 percent of the incomplete exchange rate pass-through is due to local nontraded costs, 33.7 percent to markup adjustment, and 12.2 percent to the existence of price adjustment costs.
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.
Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number
287.
Download reference. The following formats are available: HTML
(with abstract ),
plain text
(with abstract ),
BibTeX ,
RIS (EndNote, RefMan, ProCite),
ReDIF
Length:
Date of creation: 2007Date of revision:
Handle: RePEc:fip:fednsr:287Contact details of provider: Postal: 33 Liberty Street, New York, NY 10045-0001 Email: Web page: http://www.newyorkfed.org/ More information through EDIRC
Order Information: Email: Web: http://www.ny.frb.org/rmaghome/staff_rp/
For technical questions regarding this item, or to correct its listing, contact: (Diane Rosenberger).
Keywords: Foreign exchange rates ; Prices ; Beer industry ; Wholesale price indexes ; International trade ; Other versions of this item:
Paper Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2008.
"A Framework for Identifying the Sources of Local-Currency Price Stability with an Empirical Application ,"
Working Papers
1161, Princeton University, Department of Economics, Center for Economic Policy Studies..
[Downloadable!] Pinelopi K. Goldberg & Rebecca Hellerstein, 2007.
"A Framework for Identifying the Sources of Local-Currency Price Stability with an Empirical Application ,"
NBER Working Papers
13183, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Pinelopi Koujianou Goldberg & Rebecca Hellerstein, 2006.
"A Framework for Identifying the Sources of Local-Currency Price Stability with an Empirical Application ,"
2006 Meeting Papers
625, Society for Economic Dynamics.
[Downloadable!] This paper has been announced in the following NEP Reports :
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.: Rebecca Hellerstein, 2006.
"A decomposition of the sources of incomplete cross-border transmission ,"
Staff Reports
250, Federal Reserve Bank of New York.
[Downloadable!]
Other versions: Mark Bils & Peter J. Klenow, 2004.
"Some Evidence on the Importance of Sticky Prices ,"
Journal of Political Economy ,
University of Chicago Press, vol. 112(5), pages 947-985, October.
Other versions: Sofia Berto Villas-Boas, 2007.
"Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 74(2), pages 625-652, 04.
[Downloadable!] (restricted)
Burstein, Ariel Tomas & Neves, Joao C & Rebelo, Sérgio, 2001.
"Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilization ,"
CEPR Discussion Papers
2944, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions:
Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000.
"Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilizations ,"
RCER Working Papers
473, University of Rochester - Center for Economic Research (RCER).
[Downloadable!] Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000.
"Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based-Stabilizations ,"
NBER Working Papers
7862, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Burstein, Ariel T. & Neves, Joao C. & Rebelo, Sergio, 2003.
"Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations ,"
Journal of Monetary Economics ,
Elsevier, vol. 50(6), pages 1189-1214, September.
[Downloadable!] (restricted) Caplin, Andrew & Leahy, John, 1991.
"State-Dependent Pricing and the Dynamics of Money and Output ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 106(3), pages 683-708, August.
[Downloadable!] (restricted)
Other versions: Aguirregabiria, Victor, 1999.
"The Dynamics of Markups and Inventories in Retailing Firms ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 66(2), pages 275-308, April.
[Downloadable!] (restricted)
Igal Hendel & Aviv Nevo, 2006.
"Measuring the Implications of Sales and Consumer Inventory Behavior ,"
Econometrica ,
Econometric Society, vol. 74(6), pages 1637-1673, November.
[Downloadable!] (restricted)
Other versions: Nevo, Aviv, 2001.
"Measuring Market Power in the Ready-to-Eat Cereal Industry ,"
Econometrica ,
Econometric Society, vol. 69(2), pages 307-42, March.
Other versions:
Aviv Nevo, 2003.
"Measuring Market Power in the Ready-to-Eat Cereal Industry ,"
Microeconomics
0303006, EconWPA.
[Downloadable!] Aviv Nevo, 1998.
"Measuring Market Power in the Ready-to-Eat Cereal Industry ,"
NBER Working Papers
6387, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Aviv Nevo, 1999.
"Measuring Market Power in the Ready-to-Eat Cereal Industry ,"
Competition Policy Center, Working Paper Series
CPC99-001, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
[Downloadable!] Nevo, Aviv, 1998.
"Measuring Market Power in the Ready-To-Eat Cereal Industry ,"
Research Reports
25164, University of Connecticut, Food Marketing Policy Center.
[Downloadable!] Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2005.
"DSGE Models of High Exchange-Rate Volatility and Low Pass-Through ,"
Economics Working Papers
ECO2005/23, European University Institute.
[Downloadable!]
Other versions: Goldberg, Pinelopi Koujianou, 1995.
"Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry ,"
Econometrica ,
Econometric Society, vol. 63(4), pages 891-951, July.
[Downloadable!] (restricted)
Goldberg, Pinelopi Koujianou & Verboven, Frank, 2001.
"The Evolution of Price Dispersion in the European Car Market ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 68(4), pages 811-48, October.
Other versions: Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2001.
"Understanding European Real Exchange Rates ,"
Working Papers
0120, Department of Economics, Vanderbilt University.
[Downloadable!]
Other versions:
Mario Crucini & Chris Telmer & Marios Zachariadis, .
"Understanding European Real Exchange Rates ,"
GSIA Working Papers
227, Carnegie Mellon University, Tepper School of Business.
[Downloadable!] Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2005.
"Understanding European Real Exchange Rates ,"
American Economic Review ,
American Economic Association, vol. 95(3), pages 724-738, June.
[Downloadable!] Dixit, Avinash, 1991.
"Analytical Approximations in Models of Hysteresis ,"
Review of Economic Studies ,
Blackwell Publishing, vol. 58(1), pages 141-51, January.
[Downloadable!] (restricted)
Charles Engel, 2002.
"Expenditure Switching and Exchange Rate Policy ,"
NBER Working Papers
9016, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Villas-Boas, Sofia & Hellerstein, Rebecca, 2006.
"Identification of supply models of retailer and manufacturer oligopoly pricing ,"
Economics Letters ,
Elsevier, vol. 90(1), pages 132-140, January.
[Downloadable!] (restricted)
Other versions: Charles Engel, 2004.
"On the Relationship between Pass-Through and Sticky Nominal Prices ,"
Working Papers
112004, Hong Kong Institute for Monetary Research.
[Downloadable!]
Caplin, A. & Leahy, J., 1992.
"Aggregation and Optimization with State-Dependent Pricing ,"
Harvard Institute of Economic Research Working Papers
1595, Harvard - Institute of Economic Research.
Other versions:
Caplin, A. & Leahy, J., 1992.
"Aggregation and Optimization with State-Dependent Pricing ,"
Discussion Papers
1992_15, Columbia University, Department of Economics.
Andrew Caplin & John Leahy, 1997.
"Aggregation and Optimization with State-Dependent Pricing ,"
Econometrica ,
Econometric Society, vol. 65(3), pages 601-626, May.
Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997.
"Goods Prices and Exchange Rates: What Have We Learned? ,"
Journal of Economic Literature ,
American Economic Association, vol. 35(3), pages 1243-1272, September.
[Downloadable!] (restricted)
Other versions: Nakamura, Emi & Zerom, Dawit, 2008.
"Accounting for Incomplete Pass-Through ,"
MPRA Paper
14389, University Library of Munich, Germany.
[Downloadable!]
Other versions: Levy, Daniel, et al, 1997.
"The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 112(3), pages 791-825, August.
Other versions: Iga Hendel & Aviv Nevo, 2002.
"Sales and Consumer Inventory ,"
Microeconomics
0201001, EconWPA.
[Downloadable!]
Other versions:
Aviv Nevo & Igal Hendel, 2001.
"Sales and Consumer Inventory ,"
Competition Policy Center, Working Paper Series
CPC01-025, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
[Downloadable!] Igal Hendel & Aviv Nevo, 2001.
"Sales and Consumer Inventory ,"
Department of Economics, Working Paper Series
1006, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
[Downloadable!] Igal Hendel & Aviv Nevo, 2002.
"Sales and Consumer Inventory ,"
NBER Working Papers
9048, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Iga Hendel and Aviv Nevo., 2001.
"Sales and Consumer Inventory ,"
Economics Working Papers
E01-307, University of California at Berkeley.
Igal Hendel & Aviv Nevo, 2006.
"Sales and Consumer Inventory ,"
RAND Journal of Economics ,
The RAND Corporation, vol. 37(3), pages 543-561, Autumn.
Pinelopi K. Goldberg & Frank Verboven, 2001.
"Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market ,"
NBER Working Papers
8402, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Goldberg, Pinelopi & Verboven, Frank, 2001.
"Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market ,"
CEPR Discussion Papers
2926, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Goldberg, Pinelopi K. & Verboven, Frank, 2005.
"Market integration and convergence to the Law of One Price: evidence from the European car market ,"
Journal of International Economics ,
Elsevier, vol. 65(1), pages 49-73, January.
[Downloadable!] (restricted) 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)
Carlton, Dennis W, 1986.
"The Rigidity of Prices ,"
American Economic Review ,
American Economic Association, vol. 76(4), pages 637-58, September.
[Downloadable!] (restricted)
Other versions: Akerlof, George A & Yellen, Janet L, 1985.
"A Near-rational Model of the Business Cycle, with Wage and Price Intertia ,"
The Quarterly Journal of Economics ,
MIT Press, vol. 100(5), pages 823-38, Supp..
[Downloadable!] (restricted)
Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995.
"Automobile Prices in Market Equilibrium ,"
Econometrica ,
Econometric Society, vol. 63(4), pages 841-90, July.
[Downloadable!] (restricted)
Dutta, Shantanu, et al, 1999.
"Menu Costs, Posted Prices, and Multiproduct Retailers ,"
Journal of Money, Credit and Banking ,
Blackwell Publishing, vol. 31(4), pages 683-703, November.
Other versions:
Full
references Cited by : (explanations , 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.)
George Alessandria & Joseph Kaboski & Virgiliu Midrigan, 2008.
"Inventories, lumpy trade, and large devaluations ,"
Working Paper Series
WP-08-07, Federal Reserve Bank of Chicago.
[Downloadable!]
Other versions:
George Alessandria & Joseph Kaboski & Virgiliu Midrigan, 2008.
"Inventories, lumpy trade, and large devaluations ,"
Working Paper Series
2008-24, Federal Reserve Bank of San Francisco.
[Downloadable!] George Alessandria & Joseph Kaboski & Virgiliu Midrigan, 2008.
"Inventories, Lumpy Trade, and Large Devaluations ,"
NBER Working Papers
13790, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) George Alessandria & Joseph Kaboski & Virgiliu Midrigan, 2008.
"Inventories, lumpy trade, and large devaluations ,"
Working Papers
08-3, Federal Reserve Bank of Philadelphia.
[Downloadable!] Burstein, Ariel Tomas & Hellwig, Christian, 2007.
"Prices and Market Shares in a Menu Cost Model ,"
CEPR Discussion Papers
6504, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Other versions: Thomas A. Eife, 2008.
"Do Menu Costs Make Prices Sticky? ,"
Working Papers
0477, University of Heidelberg, Department of Economics, revised Oct 2008.
[Downloadable!]
Frederic S. Mishkin, 2008.
"Exchange Rate Pass-Through And Monetary Policy ,"
NBER Working Papers
13889, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Nakamura, Emi & Zerom, Dawit, 2008.
"Accounting for Incomplete Pass-Through ,"
MPRA Paper
14389, University Library of Munich, Germany.
[Downloadable!]
Other versions: Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2007.
"Optimal Monetary Policy and the Sources of Local-Currency Price Stability ,"
RSCAS Working Papers
2007/26, European University Institute.
[Downloadable!]
Other versions:
Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2007.
"Optimal Monetary Policy and the Sources of Local-Currency Price Stability ,"
NBER Working Papers
13544, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Corsetti, Giancarlo & Dedola, Luca & Leduc, Sylvain, 2007.
"Optimal Monetary Policy and the Sources of Local-Currency Price Stability ,"
CEPR Discussion Papers
6557, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2007.
"Optimal Monetary Policy and the Sources of Local-Currency Price Stability ,"
NBER Chapters ,
in: International Dimensions of Monetary Policy
National Bureau of Economic Research, Inc.
[Downloadable!] Christian Hellwig, .
"Prices and Market Shares in a Menu Cost Model (March 2007, with Ariel Burstein) ,"
UCLA Economics Online Papers
415, UCLA Department of Economics.
[Downloadable!]
Emi Nakamura, 2008.
"Pass-Through in Retail and Wholesale ,"
NBER Working Papers
13965, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions: Philippe Jeanfils, 2008.
"Imperfect exchange rate pass-through : the role of distribution services and variable demand elasticity ,"
Research series
200808-19, National Bank of Belgium.
[Downloadable!]
Kei-Mu Yi, 2008.
"Can multi-stage production explain the home bias in trade? ,"
Working Papers
08-12, Federal Reserve Bank of Philadelphia.
[Downloadable!]
Access and
download statistics Did you know? IDEAS also indexes software components .
This page was last updated on 2009-11-18.
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 .