IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/1769.html
   My bibliography  Save this paper

Exchange Rates and Prices

Author

Listed:
  • Rudiger Dornbusch

Abstract

The appreciation of the U.S. dollar over the past five years opens important areas of research. The fact of a large and persistent real appreciation poses a challenge for equilibrium theorists to uncover the change in fundamentals and seems to support the role of long-term wage contracts in macroeconomic adjustment. This paper adopts the perspective of given wages and investigates in a partial equilibrium setting the determinants of relative price changes of different groups of goods. Specifically it advances hypotheses about those sectors where an exchange rate change should lead to large relative price changes and others where the relative price effects should be negligible.The general idea is to draw an models of industrial organization to explain price adjustments in terms of the degree of market concentration, the extent of product homogeneity and substitutability, and the relative market shares of domestic and foreign firms. The exchange rate movement and the less than fully flexible money wage interact to produce a cost shock for some firms in an industry -- foreign firms in the home market and home firms abroad -- and thus bring about the need for an industry-wide adjustment in prices.

Suggested Citation

  • Rudiger Dornbusch, 1985. "Exchange Rates and Prices," NBER Working Papers 1769, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1769
    Note: ITI IFM
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w1769.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rudiger Dornbusch, 1982. "Flexible Exchange Rates and Interdependence," NBER Working Papers 1035, National Bureau of Economic Research, Inc.
    2. Jeffrey Sachs, 1985. "The Dollar and the Policy Mix: 1985," NBER Working Papers 1636, National Bureau of Economic Research, Inc.
    3. Joshua Aizenman, 1984. "Testing Deviations From Purchasing Power Parity (PPP)," NBER Working Papers 1475, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    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:nbr:nberwo:1769. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.