Implications of production sharing on exchange rate pass-through
This paper presents a theoretical model to analyse exchange rate pass-through when there is cross-border production sharing. With production sharing, between two nations, we have pass-through at two different levels, one at the level of the imported parts and components used in making the final good and the other at the level of the final good. We find the higher the pricing-to-market at the intermediate good level, the lower the pass-through for the final good. The model is further extended to analyse three-country production sharing, substitution between two alternate sources of imported inputs. Finally, we draw some policy implications. Copyright © 2008 John Wiley & Sons, Ltd.
Volume (Year): 14 (2009)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.interscience.wiley.com/jpages/1076-9307/|
|Order Information:||Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=1076-9307|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Swenson, Deborah L., 2005.
"Overseas assembly and country sourcing choices,"
Journal of International Economics,
Elsevier, vol. 66(1), pages 107-130, May.
- Deborah L. Swenson, 2004. "Overseas Assembly and Country Sourcing Choices," NBER Working Papers 10697, National Bureau of Economic Research, Inc.
- Ware, Roger & Winter, Ralph, 1988. "Forward markets, currency options and the hedging of foreign exchange risk," Journal of International Economics, Elsevier, vol. 25(3-4), pages 291-302, November.
- Aksoy, Yunus & Riyanto, Yohanes E, 2000. "Exchange Rate Pass-Through in Vertically Related Markets," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 235-251, May.
- Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
- Arndt, Sven W. & Kierzkowski, Henryk (ed.), 2001. "Fragmentation: New Production Patterns in the World Economy," OUP Catalogue, Oxford University Press, number 9780199243310.
- Jiawen Yang, 1997. "Exchange Rate Pass-Through In U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 95-104, February.
- Jiawen Yang, 1992. "Exchange Rate Pass-Through in U.S. Manufacturing Industries," Working Papers 92-28, New York University, Leonard N. Stern School of Business, Department of Economics.
- Saeid Mahdavi, 2002. "The response of the US export prices to changes in the dollar's effective exchange rate: further evidence from industry level data," Applied Economics, Taylor & Francis Journals, vol. 34(17), pages 2115-2125.
- Froot, Kenneth A & Klemperer, Paul D, 1989. "Exchange Rate Pass-Through When Market Share Matters," American Economic Review, American Economic Association, vol. 79(4), pages 637-654, September.
- Kenneth A. Froot & Paul Klemperer, 1988. "Exchange Rate Pass-Through When Market Share Matters," NBER Working Papers 2542, National Bureau of Economic Research, Inc.
- Yang, Jiawen, 1998. "Pricing-to-market in U.S. imports and exports: A time series and cross-sessional study," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 843-861. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ijf:ijfiec:v:14:y:2009:i:4:p:334-345. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.