Industry Restructuring, Mark-ups, and Exchange Rate Pass-Through
AbstractConsumer prices are not very responsive to movements in nominal exchange rates and their response has fallen in Canada since the mid 1980s. This paper explores two of the most likely explanations for this decline in exchange rate pass-through to consumer prices: (1) lower inflation and (2) restructuring in the retail sector. We believe that both explanations are important but our primary focus in this paper is on the second explanation. We discuss the restructuring that has occurred in Canadian retail and trends in mark-ups and concentration in that sector. We argue that to understand these trends, it is important to examine pass-through in industrial organization models with strategic elements. Finally, we present a series of such models and evaluate the effects of various forms of restructuring on mark-ups, concentration, and exchange rate pass-through.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1120.
Length: 61 pages
Date of creation: Oct 2006
Date of revision:
Pass-Through; Restructuring; Strategic Pricing; Mark-ups; Exchange Rates; Imperfect Competition;
Other versions of this item:
- Beverly Lapham & Danny Leung, 2006. "Industry Restructuring, Mark-ups, and Exchange Rate Pass-Through," 2006 Meeting Papers 707, Society for Economic Dynamics.
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- F15 - International Economics - - Trade - - - Economic Integration
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-10 (All new papers)
- NEP-CBA-2007-02-10 (Central Banking)
- NEP-COM-2007-02-10 (Industrial Competition)
- NEP-IFN-2007-02-10 (International Finance)
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