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Market Share and Exchange Rate Pass-Through in World Automobile Trade

Author

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  • Feenstra, R.C.
  • Gagnon, J.E.
  • Knetter, M.M.

Abstract

This paper explores the relationship between exchange rate pass-through and market share for monopolistically competitive exporters. Under fairly general assumptions we show that pass-through should be high for exporters based in a country with a very large share of total destination market sales. For source countries with small and intermediate market shares, the theoretical relationship is potentially nonlinear and sensitive to assumptions about the nature of consumer demand and firm interactions. The model is estimated using a panel data set of automobile exports from France, Germany, Sweden, and the United States to a variety of destinations over the period 1970-88. The empirical relationship between pass-through and market share is significantly nonlinear: pass-through is lowest when the source country's market share is around 45 percent and it is highest when the source country's share approaches 100 percent.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Feenstra, R.C. & Gagnon, J.E. & Knetter, M.M., 1993. "Market Share and Exchange Rate Pass-Through in World Automobile Trade," Papers 93-14, California Davis - Institute of Governmental Affairs.
    • Handle: RePEc:fth:caldav:93-14
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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