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Automobile Exports: Export price and retail price

Listed author(s):
  • YOSHIDA Yushi
  • SASAKI Yuri

Given the recent theoretical emphasis on firm-level heterogeneity in international trade, we examine the price-setting behaviors of Japanese automobile exporting firms as they correspond with the fluctuations of foreign exchange rates. We do so by employing international trade datasets revitalized by the use of the geographical locations of exporting firms within an exporting country. With this technique, we transform a national-level dataset into a quasi-firm-product-level dataset. First, by restricting the dataset to the two exporting ports, we are able to estimate the price-setting behaviors of one particular Japanese automaker. Consistent with the multi-product exporter model, we find heterogeneity among auto-models in the exchange rate pass-through (ERPT) even when we restrict the dataset to a single automaker. Second, coupled with the manufacturer's suggested retail price (MSRP) in the US market, we examine the dynamic behaviors of model-specific price margins for US distributors and Japanese automakers. The price margins for US distributors have shrunk substantially, particularly when the US dollar depreciated after the global financial crisis.

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File URL: http://www.rieti.go.jp/jp/publications/dp/15e024.pdf
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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 15024.

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Length: 43 pages
Date of creation: Feb 2015
Handle: RePEc:eti:dpaper:15024
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