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Pricing to market at firm level

  • Lourdes Martín
  • Diego Rodríguez

    ()

This paper tries to contribute to the renewed literature about price differences across countries (the so-called border effect). Specifically, it analyzes the reasons underlying changes in relative prices across export/domestic markets for an open economy. The theoretical benchmark, based on the existence of Pricing to Market strategies, also takes into account some hypotheses about the effects of demand variations and market power on prices. The empirical analysis, using firm panel data for the nineties, points out the positive (though small) impact of the exchange rate on the evolution of price ratio. Additionally, the results also suggest a procyclical behavior of prices in both markets, which is positively affected by the degree of competition. Though data do not allow an in-depth analysis, some hypothesis in terms of foreseeable effects of the European Monetary Union on relative prices are provided.

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File URL: http://hdl.handle.net/10.1007/BF02663650
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Article provided by Springer in its journal Review of World Economics.

Volume (Year): 140 (2004)
Issue (Month): 2 (June)
Pages: 302-320

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Handle: RePEc:spr:weltar:v:140:y:2004:i:2:p:302-320
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  1. Charles Engel & John H. Rogers, 1995. "How wide is the border?," International Finance Discussion Papers 498, Board of Governors of the Federal Reserve System (U.S.).
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