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Swedish Export Price Determination: Pricing to Market Shares?

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  • Adolfson, Malin

    ()
    (Dept. of Economics, Stockholm School of Economics)

Abstract

The Swedish export price determination for automobiles and kraft paper to three destination countries, over the period 1980-1994, is investigated. Formal tests on an error correction model indicate results consistent with price discrimination in Swedish exports of both goods. The exporters use their market power for pricing to market, which is characterized by the concern for foreign conditions, and implies an incomplete exchange rate pass-through. However, the pricing behaviour does not seem to be determined by the development of market shares, in any cases except one. The total pass-through to the local currency price within a year, that is the effect of an exchange rate change working through all variables and all interactions in the price determination, span between -16 % and +109 %.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 306.

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Length: 51 pages
Date of creation: 26 Feb 1999
Date of revision:
Handle: RePEc:hhs:hastef:0306

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Keywords: Cointegration; exchange rates; export prices; market shares; pass-through; pricing to market;

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References

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  1. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  2. Feenstra, Robert C. & Gagnon, Joseph E. & Knetter, Michael M., 1996. "Market share and exchange rate pass-through in world automobile trade," Journal of International Economics, Elsevier, Elsevier, vol. 40(1-2), pages 187-207, February.
  3. Jayant Menon, 1992. "Exchange rates and prices of Australian manufactured exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 128(4), pages 695-710, December.
  4. Naug, Bjorn & Nymoen, Ragnar, 1996. " Pricing to Market in a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 98(3), pages 329-50.
  5. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(3), pages 1243-1272, September.
  6. Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc.
  7. Kasa, Kenneth, 1992. "Adjustment costs and pricing-to-market theory and evidence," Journal of International Economics, Elsevier, Elsevier, vol. 32(1-2), pages 1-30, February.
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  9. Joseph E. Gagnon & Michael M. Knetter, 1992. "Markup Adjustment and Exchange Rate Fluctuations: Evidence From Panel Data on Automobile Exports," NBER Working Papers 4123, National Bureau of Economic Research, Inc.
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  21. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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Citations

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Cited by:
  1. Westlund, Hans & Johansson, Magnus & Molinder, Jonas, 2000. "Exchange Rate Sensitivity Of Swedish Regions," ERSA conference papers ersa00p140, European Regional Science Association.
  2. Sarah Guillou & Stefano Schiavo, 2007. "Export prices and increasing world competition: evidence from French, German, and Italian pricing behavior," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2007-25, Observatoire Francais des Conjonctures Economiques (OFCE).
  3. Brissimis, Sophocles N. & Kosma, Theodora S., 2007. "Market power and exchange rate pass-through," International Review of Economics & Finance, Elsevier, Elsevier, vol. 16(2), pages 202-222.
  4. Roberto Basile & Sergio de Nardis & Alessandro Girardi, 2009. "Pricing to market of Italian exporting firms," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(12), pages 1543-1562.
  5. Sophocles N. Brissimis & Theodora S. Kosma, 2006. "Market Conduct, Price Interdependence and Exchange Rate Pass-Through," Working Papers, Bank of Greece 51, Bank of Greece.
  6. Brissimis, Sophocles N. & Kosma, Theodora, 2005. "Market power, innovative activity and exchange rate pass-through in the euro area," Working Paper Series, European Central Bank 0531, European Central Bank.
  7. Adolfson, Malin, 2001. "Export price responses to exogenous exchange rate movements," Economics Letters, Elsevier, Elsevier, vol. 71(1), pages 91-96, April.
  8. Tantirigama, Mangalika & Lee, Minsoo & Sanyal, Amal, 2008. "New Zealand's Pastoral Exports: Can Small Countries Practise Pricing-to-Market?," Review of Applied Economics, Review of Applied Economics, Review of Applied Economics, vol. 4(1-2).

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