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Revisiting Perverse Effects on Exchange Rate Pass-Through

Author

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  • Koji Okuguchi

    (Department of Economics and Information, Gifu Shotoku Gakuen University, Japan)

Abstract

The effects of a change in the exchange rate on product prices are investigated using a static international duopoly model without product differentiation. A general condition is derived for perverse exchange rate pass-through assuming decreasing marginal costs for firms in two trading countries. The result is clarified on the basis of a new diagram for determining equilibrium supplies in the two countries.

Suggested Citation

  • Koji Okuguchi, 2005. "Revisiting Perverse Effects on Exchange Rate Pass-Through," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 4(1), pages 67-76, April.
  • Handle: RePEc:ijb:journl:v:4:y:2005:i:1:p:67-76
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    References listed on IDEAS

    as
    1. Gross, Dominique M. & Schmitt, Nicolas, 2000. "Exchange rate pass-through and dynamic oligopoly: an empirical investigation," Journal of International Economics, Elsevier, vol. 52(1), pages 89-112, October.
    2. 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.
    3. Tivig, Thusnelda, 1996. "Exchange rate pass-through in two-period duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 631-645, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    exchange rate pass-through; international duopoly; decreasing marginal cost;

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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