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Non-Price Competition and Exchange Rate Pass-Through

  • Aurora Ascione

A substantial body of empirical works document that exchange rate pass-through to consumer prices is incomplete. This evidence has cast doubts on the ability of flexible exchange rates to generate expenditure switching. In a dynamic stochastic discrete-time duopoly game, non-price competition among .rms endogenously originates a degree of exchange ratepass-through close to zero together with an expenditure switching e¤ect stronger than in the standard models.

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Paper provided by European University Institute in its series Economics Working Papers with number ECO2007/54.

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Date of creation: 2007
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Handle: RePEc:eui:euiwps:eco2007/54
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  1. Jose Manuel Campa & Linda S. Goldberg, 2006. "Distribution margins, imported inputs, and the sensitivity of the CPI to exchange rates," Staff Reports 247, Federal Reserve Bank of New York.
  2. Burstein, Ariel Tomas & Neves, Joao C & Rebelo, Sérgio, 2001. "Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilization," CEPR Discussion Papers 2944, C.E.P.R. Discussion Papers.
  3. Maurice Obstfeld, 2001. "International Macroeconomics: Beyond the Mundell-Fleming Model," NBER Working Papers 8369, National Bureau of Economic Research, Inc.
  4. Guy Debelle & Gabriele Galati, 2007. "Current Account Adjustment and Capital Flows," Review of International Economics, Wiley Blackwell, vol. 15(5), pages 989-1013, November.
  5. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
  6. Rotemberg, Julio J., 2005. "Customer anger at price increases, changes in the frequency of price adjustment and monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 829-852, May.
  7. 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.).
  8. Charles Engel, 2002. "Expenditure Switching and Exchange Rate Policy," NBER Working Papers 9016, National Bureau of Economic Research, Inc.
  9. Corsetti, Giancarlo & Dedola, Luca, 2003. "Macroeconomics of International Price Discrimination," CEPR Discussion Papers 3710, C.E.P.R. Discussion Papers.
  10. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange rate pass-through into import prices: a macro or micro phenomenon?," Staff Reports 149, Federal Reserve Bank of New York.
  11. Koelln, K. & Rush, M., 1990. "Rigid Prices And Flexible Products," Papers 90-1, Florida - College of Business Administration.
  12. Hamid Faruqee, 2006. "Exchange Rate Pass-Through in the Euro Area," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 4.
  13. Mario J. Crucini & Chris I. Telmer & Marios Zachariadis, 2005. "Understanding European Real Exchange Rates," American Economic Review, American Economic Association, vol. 95(3), pages 724-738, June.
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