Exchange Rates, Wages, and Export Price Dynamics
AbstractIn this paper, the effects on export prices (in the currency of the exporter) of shocks to the exchange rate, the exporting firms' costs and foreign prices are investigated. The theoretical analysis is done with alternative assumptions regarding the currency in which prices are set and the desired markup. After that, a VAR-framework is used to analyze which theory predicts actual outcome the best. The results indicate that export prices (in the currency of the exporter) respond strongly to exchange rate shocks and the effects seem to be in line with the theory of producer currency pricing and pricing to market. Wage shocks have insignificant effects.
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Bibliographic InfoPaper provided by National Institute of Economic Research in its series Working Paper with number 132.
Length: 51 pages
Date of creation: 26 Nov 2013
Date of revision:
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More information through EDIRC
Vector autoregression; exchange rates; export prices; local currency pricing; producer currency pricing; pricing to the market;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-06 (All new papers)
- NEP-INT-2013-12-06 (International Trade)
- NEP-MAC-2013-12-06 (Macroeconomics)
- NEP-OPM-2013-12-06 (Open Economy Macroeconomics)
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