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Exchange Rate Pass-Through and Dynamic Oligopoly: An Empirical Investigation

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  • Dominique M. Gross
  • Mr. Nicolas Schmitt

Abstract

This paper explicitly takes into account the dynamic oligopolistic rivalry among source producers to evaluate the degree of exchange rate pass-through. Using recent time-series techniques for the case of imported automobiles in Switzerland, the results show that prices are strategic complements and that the degree of pass-through is lower in the long run than in the short run. We attribute this to the fact that, although some rivals match long-term price changes, others do not, inducing the producer who faces a change in exchange rate to absorb a greater proportion of the variation.

Suggested Citation

  • Dominique M. Gross & Mr. Nicolas Schmitt, 1999. "Exchange Rate Pass-Through and Dynamic Oligopoly: An Empirical Investigation," IMF Working Papers 1999/047, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1999/047
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