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A Dynamic Model of Endogenous Exchange Rate Pass-Through

Listed author(s):
  • Tokhir Mirzoev

    (Ohio State University)

This paper examines a two-country new open economy macroeconomics model with price stickiness a la Taylor, where exporters' choice of invoicing currency is endogenous. Besides generating incomplete pass-through, the model yields four main results. First, firms' invoicing strategy is generally time-varying. Second, instant pass-through into import prices is greater than into export prices when depreciations are caused by domestic monetary expansions. Thirdly, average pass-through is asymmetric in times of persistent depreciations and depreciations. It is higher under depreciations when the destination market is more competitive. Finally, cross-country differences in money supply variability produce an origin-based asymmetry: different average pass- through rates into import and export prices.

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File URL: http://econwpa.repec.org/eps/if/papers/0409/0409002.pdf
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Paper provided by EconWPA in its series International Finance with number 0409002.

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Length: 32 pages
Date of creation: 07 Sep 2004
Handle: RePEc:wpa:wuwpif:0409002
Note: Type of Document - pdf; pages: 32
Contact details of provider: Web page: http://econwpa.repec.org

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  13. Campa, Jose Manuel & Gonzalez Minguez, Jose M., 2006. "Differences in exchange rate pass-through in the euro area," European Economic Review, Elsevier, vol. 50(1), pages 121-145, January.
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  26. Giovanni P. Olivei, 2002. "Exchange rates and the prices of manufacturing products imported into the United States," New England Economic Review, Federal Reserve Bank of Boston, issue Q 1, pages 3-18.
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  29. Cletus C. Coughlin & Patricia S. Pollard, 2000. "Exchange rate pass-through in U. S. manufacturing: exchange rate index choice and asymmetry issues," Working Papers 2000-022, Federal Reserve Bank of St. Louis.
  30. Hamid Faruqee, 2004. "Exchange Rate Pass-Through in the Euro Area; The Role of Asymmetric Pricing Behavior," IMF Working Papers 04/14, .
  31. José Manuel Campa & Jose M. González Mínguez, 2002. "Differences in exchange rate pass-through in the euro area," Working Papers 0219, Banco de España;Working Papers Homepage.
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