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Exchange Rate Pass-Through and Dynamic Oligopoly

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  • Dominique M. Gross
  • Nicolas Schmitt

Abstract

This paper explicitly takes into account the dynamic oligopolistic rivalry among source producers to evaluate the degree of exchange rate pass-through. Using recent time-series techniques for the case of imported automobiles in Switzerland, the results show that prices are strategic complements and that the degree of pass-through is lower in the long run than in the short run. We attribute this to the fact that, although some rivals match long-term price changes, others do not, inducing the producer who faces a change in exchange rate to absorb a greater proportion of the variation.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/47.

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Length: 33
Date of creation: 01 Apr 1999
Date of revision:
Handle: RePEc:imf:imfwpa:99/47

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Cited by:
  1. Prema-chandra Athukorala & Jayant Manon, 1994. "Exchange Rates and Strategic Pricing: the Case of Swedish Machinery Exports," Working Papers 1994.08, School of Economics, La Trobe University.
  2. Alexander Mihailov, 2004. "The Empirical Range of Pass-Through in US, German and Japanese Macrodata," Money Macro and Finance (MMF) Research Group Conference 2004 44, Money Macro and Finance Research Group.
  3. MoonJoong Tcha & Jae H. Kim, 2003. "Exchange Rate Pass-Through and Market Response: The Case of the US Steel Market," Economics Discussion / Working Papers 03-02, The University of Western Australia, Department of Economics.
  4. Hernán Rincón & Edgar Caicedo & Norberto Rodríguez, 2005. "Exchange Rate Pass-Through Effects : A Disaggregate Analysis Of Colombian Imports Of Manufactured Goods," BORRADORES DE ECONOMIA 002682, BANCO DE LA REPÚBLICA.
  5. Charles P. Thomas & Jaime Marquez, 2006. "Measurement matters for modeling U.S. import prices," International Finance Discussion Papers 883, Board of Governors of the Federal Reserve System (U.S.).
  6. Jacint Balaguer & Ezequiel Uriel Jiménez & Vicente Orts, 2003. "Pricing To Market Behavior In Oligopolistic Competition: A Microeconometric Approach," Working Papers. Serie EC 2003-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Patricia S. Pollard & Cletus C. Coughlin, 2004. "Size matters: asymmetric exchange rate pass-through at the industry level," Working Papers 2003-029, Federal Reserve Bank of St. Louis.
  8. Alexander Mihailov, 2003. "Exchange Rate Pass-Through on Prices in Macrodata: A Comparative Sensitivity Analysis," Economics Discussion Papers 568, University of Essex, Department of Economics.

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