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Exchange rate and pricing behavior: Comparison of Taiwan with Japan for manufacturing industries

  • Tsui, Hsiao-Chien
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    This paper investigates a theoretical model that explains the relationship between exchange rate and profit when it takes the effect of exchange rate on both input and output prices into account. Using the panel data of 19 two-digit Taiwanese and 17 two-digit Japanese manufacturing industries over the period of 1984-1994, the empirical evidence shows that a higher degree of net external exposure in Taiwan than it in Japan. The empirical results also suggest that an appreciation of home currency, industries of Taiwan take advantage of the appreciation of the New Taiwan dollar, enjoying a reduction in the price of imported inputs into production. As far as this study shows, however, the merit to imported inputs of a strong Japanese Yen has not been confirmed in Japan.

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    File URL: http://www.sciencedirect.com/science/article/B6VF1-4MYF675-1/1/a8b4991350b53c5a18f410dd0c6090d6
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    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 20 (2008)
    Issue (Month): 2 (March)
    Pages: 290-301

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    Handle: RePEc:eee:japwor:v:20:y:2008:i:2:p:290-301
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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    1. Campa, Jose Manuel & Goldberg, Linda S, 1999. "Investment, Pass-Through, and Exchange Rates: A Cross-Country Comparison," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 287-314, May.
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    4. repec:ltr:wpaper:1992.32 is not listed on IDEAS
    5. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    6. Doi, Noriyuki, 1991. "Aggregate Export Concentration in Japan," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 433-38, June.
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    8. Richard H. Clarida, 1992. "The real exchange rate and US manufacturing profits: a theoretical framework with some empirical support," Research Paper 9214, Federal Reserve Bank of New York.
    9. Goldberg, Linda S., 1990. "Measuring External Openness: The Index Of Effective Exposure," Working Papers 90-19, C.V. Starr Center for Applied Economics, New York University.
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    15. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
    16. Kadiyali, Vrinda, 1997. "Exchange rate pass-through for strategic pricing and advertising: An empirical analysis of the U.S. photographic film industry," Journal of International Economics, Elsevier, vol. 43(3-4), pages 437-461, November.
    17. Otani, Akira & Shiratsuka, Shigenori & Shirota, Toyoichiro, 2006. "Revisiting the Decline in the Exchange Rate Pass-Through: Further Evidence from Japan's Import Prices," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 24(1), pages 61-75, March.
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