Market Share and Exchange Rate Pass-Through in World Automobile Trade
AbstractThis paper explores the relationship between exchange rate pass-through and market share for monopolistically competitive exporters. Under fairly general assumptions we show that pass-through should be high for exporters based in a country with a very large share of total destination market sales. For source countries with small and intermediate market shares, the theoretical relationship is potentially nonlinear and sensitive to assumptions about the nature of consumer demand and firm interactions. The model is estimated using a panel data set of automobile exports from France, Germany, Sweden, and the United States to a variety of destinations over the period 1970-1988. The empirical relationship between pass-through and market share is significantly non-linear: pass-through is the lowest when the source country's market share is around 45 percent and it is highest when the source country's share approaches 100 percent.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4399.
Date of creation: Jul 1993
Date of revision:
Publication status: published as Journal of International Economics, vol. 40, no. 1-2, Feb. 1996, pp. 187-207
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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- 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, vol. 40(1-2), pages 187-207, February.
- Robert C. Feenstra & Joseph E. Gagnon & Michael M. Knetter., 1993. "Market share and exchange rate pass-through in world automobile trade," International Finance Discussion Papers 446, Board of Governors of the Federal Reserve System (U.S.).
- Feenstra, R.C. & Gagnon, J.E. & Knetter, M.M., 1993. "Market Share and Exchange Rate Pass-Through in World Automobile Trade," Papers 93-14, California Davis - Institute of Governmental Affairs.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
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