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! ]

Prices and Exchange Rates: A Theory of Disconnection

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jose Antonio Rodriguez Lopez () (Department of Economics, University of California-Irvine)

Additional information is available for the following registered author(s):

Abstract

I present partial and general equilibrium versions of a sticky-wage model of exchange rate pass-through with heterogeneous producers and endogenous markups. The model's results are consistent with a story of substantial expenditure-switching effects of exchange rate changes in the presence of low levels of exchange rate pass-through to firm-level and aggregate import prices. After an exchange rate shock, aggregate import prices are subject to a survivorship bias due to changes in the extensive margin of trade. At the firm level, each producer adjusts its markups depending on its own productivity and the change in the competition environment generated by the exchange rate movement. Firm-level price responses are asymmetric -- different for appreciations and depreciations -- and adjustments in the intensive margin of trade are substantial. The general equilibrium model, solved with a second-order solution method, preserves the partial equilibrium results and shows how firm relocations increase the persistence of exogenous shocks.

Download Info
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.

File URL: http://www.economics.uci.edu/docs/2008-09/lopez-02.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 080902.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 35 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:irv:wpaper:080902

Contact details of provider:
Postal: Irvine, CA 92697-3125
Phone: (949) 824-5788
Web page: http://www.econ.uci.edu/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Vanessa Roche).

Related research
Keywords: Exchange rate pass-through; Heterogeneous firms; Endogenous markups;

Other versions of this item:

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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.:
  1. Feenstra, Robert C., 2003. "A homothetic utility function for monopolistic competition models, without constant price elasticity," Economics Letters, Elsevier, vol. 78(1), pages 79-86, January. [Downloadable!] (restricted)
  2. Kollmann, Robert, 2002. "Monetary policy rules in the open economy: effects on welfare and business cycles," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 989-1015, July. [Downloadable!] (restricted)
    Other versions:
  3. Bergin, Paul R. & Feenstra, Robert C., 2001. "Pricing-to-market, staggered contracts, and real exchange rate persistence," Journal of International Economics, Elsevier, vol. 54(2), pages 333-359, August. [Downloadable!] (restricted)
    Other versions:
  4. Maurice Obstfeld, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," Center for International and Development Economics Research, Working Paper Series 1022, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  5. Charles Engel, 2002. "Expenditure Switching and Exchange Rate Policy," NBER Working Papers 9016, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. 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:
  7. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
    Other versions:
  8. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  9. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Blackwell Publishing, vol. 75(1), pages 295-316, 01. [Downloadable!] (restricted)
    Other versions:
  10. Bergin, Paul R. & Feenstra, Robert C., 2000. "Staggered price setting, translog preferences, and endogenous persistence," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 657-680, June. [Downloadable!] (restricted)
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.)

  1. Emi Nakamura & Jón Steinsson, 2009. "Lost in Transit: Product Replacement Bias and Pricing to Market," NBER Working Papers 15359, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? There are NEP reports in over 80 fields that deliver new research to your email.

This page was last updated on 2009-11-22.

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.