IDEAS home Printed from https://ideas.repec.org/p/isu/genstf/1998010108000013522.html
   My bibliography  Save this paper

Exchange rate and market power in import price

Author

Listed:
  • Seo, Jeong-Yun

Abstract

This study consists of three papers in the area of international market analysis, as listed in Chapter 1, 2, and 3. Each paper has its own issue and application, but the main theme behind these papers is to figure out interactions of international firms' real decisions with respect to changes in financial variables or structure attributing to the firms' behaviors. The papers focus especially on a risk-averse international firm's decision model with respect to fluctuations in exchange rates;The first two papers relate the international firm's ex-ante real decision to the portfolio theory in correspondence to recent importance of managing risk. Chapter 1 deals with interactions between diversification strategy and currency hedging by futures contracts when a competitive & risk-averse importing agent chooses optimal import quantities and hedging levels under dual uncertainties of price and exchange rate. The resulting total import level under the scheme depends significantly on the degree of correlation among relevant currencies; that is because the currency hedging virtually determines the covariance effect of portfolio variance. Chapter 2 introduces another risk-diversification model in determining the input mixture within a framework of the capital-asset-price-model. The Chinese wheat import market is empirically analyzed to justify this portfolio approach and to explain potential conflicts between the buyer's risk diversification efforts and suppliers' market power. While concentrating on the risk reduction effect, these papers support hedging roles of currency futures contracts among the advanced markets in Chapter 1 and of diversification strategy in importing non-homogenous products in Chapter 2;As an illustration of the market structure related to demand functions, Chapter 3 deals with the topic of pass-through in terms of the oligopoly pricing conduct in the market. To find out the nature of demand convexity, this study draws several testable implications and also evaluates an empirical example of the import beer pricing in the US. Given the open debate on the stability of the level of pass-through, a Kalman filter estimation is adapted in the empirical application.

Suggested Citation

  • Seo, Jeong-Yun, 1998. "Exchange rate and market power in import price," ISU General Staff Papers 1998010108000013522, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:1998010108000013522
    as

    Download full text from publisher

    File URL: https://dr.lib.iastate.edu/server/api/core/bitstreams/ff16c84a-e3e2-4490-9214-f13587ee9e75/content
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
    2. Jürgen Meckl, 1996. "Market power of firms and exchange-rate fluctuations," Journal of Economics, Springer, vol. 63(1), pages 57-77, February.
    3. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    4. Daniel H. Pick & Colin A. Carter, 1994. "Pricing to Market with Transactions Denominated in a Common Currency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(1), pages 55-60.
    5. Stanford, William G., 1986. "Subgame perfect reaction function equilibria in discounted duopoly supergames are trivial," Journal of Economic Theory, Elsevier, vol. 39(1), pages 226-232, June.
    6. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    7. Feinberg, Robert M, 1991. "The Choice of Exchange-Rate Index and Domestic Price Passthrough," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 409-420, June.
    8. Froot, Kenneth A & Klemperer, Paul D, 1989. "Exchange Rate Pass-Through When Market Share Matters," American Economic Review, American Economic Association, vol. 79(4), pages 637-654, September.
    9. John Haltiwanger & Joseph E. Harrington Jr., 1991. "The Impact of Cyclical Demand Movements on Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 89-106, Spring.
    10. Kyle Bagwell & Robert Staiger, 1997. "Collusion Over the Business Cycle," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 82-106, Spring.
    11. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    12. Dueker, Michael J, 1997. "Markov Switching in GARCH Processes and Mean-Reverting Stock-Market Volatility," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 26-34, January.
    13. Thomas F. Cooley & Edward C. Prescott, 1973. "Systematic (Non-Random) Variation Models Varying Parameter Regression: A Theory And Some Applications," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 2, number 4, pages 463-473, National Bureau of Economic Research, Inc.
    14. Stephen R. Koontz & Philip Garcia & Michael A. Hudson, 1993. "Meatpacker Conduct in Fed Cattle Pricing: An Investigation of Oligopsony Power," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(3), pages 537-548.
    15. Raymond J. Deneckere & Dan Kovenock, 1992. "Price Leadership," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 143-162.
      • Raymond Deneckere & Dan Kovenock, 1988. "Price Leadership," Discussion Papers 773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    16. Menon, Jayant, 1995. "Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
    17. Jiawen Yang, 1997. "Exchange Rate Pass-Through In U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 95-104, February.
    18. Anne Sibert, 1992. "Exchange Rates, Market Structure, Prices and Imports," The Economic Record, The Economic Society of Australia, vol. 68(3), pages 233-239, September.
    19. Levin, Jay H., 1994. "On sluggish output adjustment and exchange rate dynamics," Journal of International Money and Finance, Elsevier, vol. 13(4), pages 447-458, August.
    20. Kim, Yoonbai, 1990. "Exchange Rates and Import Prices in the United States: A Varying-Parameter Estimation of Exchange-Rate Pass-Through," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 305-315, July.
    21. Athukorala, Premachandra & Menon, Jayant, 1994. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Economic Journal, Royal Economic Society, vol. 104(423), pages 271-281, March.
    22. Deneckere, Raymond J & Kovenock, Dan & Lee, Robert, 1992. "A Model of Price Leadership Based on Consumer Loyalty," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 147-156, June.
    23. Alan Kirman & Louis Phlips, 1996. "Exchange-rate pass-through and market structure," Journal of Economics, Springer, vol. 64(2), pages 129-154, June.
    24. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    25. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
    26. Gron, Anne & Swenson, Deborah L, 1996. "Incomplete Exchange-Rate Pass-Through and Imperfect Competition: The Effect of Local Production," American Economic Review, American Economic Association, vol. 86(2), pages 71-76, May.
    27. Sibert, Anne, 1992. "Exchange Rates, Market Structure, Prices and Imports," The Economic Record, The Economic Society of Australia, vol. 68(202), pages 233-239, September.
    28. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chang, Byoung-Ky, 1999. "Three essays on imperfect competition and exchange rate pass-through in the presence of multiple exchange rates," ISU General Staff Papers 1999010108000013554, Iowa State University, Department of Economics.
    2. Kadiyali, Vrinda, 1997. "Exchange rate pass-through for strategic pricing and advertising: An empirical analysis of the U.S. photographic film industry," Journal of International Economics, Elsevier, vol. 43(3-4), pages 437-461, November.
    3. Mallick, Sushanta & Marques, Helena, 2012. "Pricing to market with trade liberalization: The role of market heterogeneity and product differentiation in India’s exports," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 310-336.
    4. Sushanta Mallick & Helena Marques, 2008. "Passthrough of Exchange Rate and Tariffs into Import Prices of India: Currency Depreciation versus Import Liberalization," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 765-782, September.
    5. Mallick, Sushanta & Marques, Helena, 2010. "Data frequency and exchange rate pass-through: Evidence from India's exports," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 13-22, January.
    6. Vesala, Jukka, 1992. "Incomplete exchange rate pass-through and hysteresis in trade : A survey of recent theories and an empirical study of export pricing of Finnish paper manufacturies," Research Discussion Papers 29/1992, Bank of Finland.
    7. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    8. Carew, Richard, 2000. "Pricing To Market Behavior: Evidence From Selected Canadian And U.S. Agri-Food Exports," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-18, December.
    9. Goldberg, Pinelopi Koujianou & Knetter, Michael M., 1999. "Measuring the intensity of competition in export markets," Journal of International Economics, Elsevier, vol. 47(1), pages 27-60, February.
    10. Baoying Lai & Nathan Lael Joseph, 2010. "Pricing-to-market and the volatility of UK export prices," Applied Financial Economics, Taylor & Francis Journals, vol. 20(18), pages 1441-1460.
    11. Vesala, Jukka, 1992. "Incomplete exchange rate pass-through and hysteresis in trade: A survey of recent theories and an empirical study of export pricing of Finnish paper manufacturies," Bank of Finland Research Discussion Papers 29/1992, Bank of Finland.
    12. repec:zbw:bofrdp:1992_029 is not listed on IDEAS
    13. Boone, Jan, 2004. "Balance of Power," CEPR Discussion Papers 4733, C.E.P.R. Discussion Papers.
    14. Jeffrey Frankel & David Parsley & Shang-Jin Wei, 2012. "Slow Pass-through Around the World: A New Import for Developing Countries?," Open Economies Review, Springer, vol. 23(2), pages 213-251, April.
    15. Strasser, Georg, 2013. "Exchange rate pass-through and credit constraints," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 25-38.
    16. Gordon M. Bodnar & Bernard Dumas & Richard C. Marston, 2002. "Pass‐through and Exposure," Journal of Finance, American Finance Association, vol. 57(1), pages 199-231, February.
    17. Carlo Gola, 2000. "Export pricing strategy of Italian firms: from the depreciation of the lira to the euro," LIUC Papers in Economics 77, Cattaneo University (LIUC).
    18. Boone, Jan, 2002. "'Be Nice, Unless it Pays to Fight': A New Theory of Price Determination with Implications for Competition Policy," CEPR Discussion Papers 3342, C.E.P.R. Discussion Papers.
    19. Cheung, Yin-Wong & Chinn, Menzie & Fujii, Eiji, 2001. "Market Structure and the Persistence of Sectoral Real Exchange Rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(2), pages 95-114, April.
    20. Yang, Jiawen, 1998. "Pricing-to-market in U.S. imports and exports: A time series and cross-sessional study," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 843-861.
    21. Abdulnasser Hatemi-J & Manuchehr Irandoust, 2004. "Is Pricing to Market Behavior a Long-Run Phenomenon? A Non-Stationary Panel Analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 31(1), pages 55-67, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:isu:genstf:1998010108000013522. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Curtis Balmer (email available below). General contact details of provider: https://edirc.repec.org/data/deiasus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.