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Export Rivalry and Exchange Rate Pass-Through

Author

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  • Sun, Puyang
  • Hou, Xinyu
  • Tan, Yong

Abstract

In this paper we investigate the influence of market rivalry on firm-level exchange rate pass-through. Similar to Bloom et al. (2013), we define market rivalry as product market proximity, and expect the cross market spillovers, i.e., through leaked information or reputation, to affect firm-level export price. Using a dataset from comprehensive Chinese exporters during 2000-2007, we find supporting evidence of this influence. Firms that face a high degree of market rivalry are less responsive to exchange rate fluctuations, which suggests a higher exchange rate pass-through. The influence of market rivalry is stronger on firms that export consumption and heterogeneous products, and to developed countries. Our results are robust to different measures of market rivalry and specifications.

Suggested Citation

  • Sun, Puyang & Hou, Xinyu & Tan, Yong, 2017. "Export Rivalry and Exchange Rate Pass-Through," MPRA Paper 83369, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:83369
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    References listed on IDEAS

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    More about this item

    Keywords

    Market Rivalry; Exchange Rate Pass-through; Cross Markets Spillovers;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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