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Goods Prices and Exchange Rates: What Have We Learned?

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  • Pinelopi K. Goldberg
  • Michael M. Knetter

Abstract

Import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country. Recent research indicates that common-currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets. This evidence suggests that incomplete pass-through is a consequence of third-degree price discrimination. While distance matters for market segmentation, borders have independent effects. The source of the border effect has not been clearly identified. Furthermore, there is little evidence yet to suggest substantial market power is implied by the observed price discrimination.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5862.

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Date of creation: Dec 1996
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Publication status: published as Journal of Economic Literature (September 1997): 1243-1272.
Handle: RePEc:nbr:nberwo:5862

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