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Sticky Prices, a Volatile Exchange Rate and the Border

Author

Listed:
  • Mark David Witte

    (University of North Carolina at Chapel Hill)

Abstract

This paper introduces a method that leads to more accurate estimates of the proportion of the border effect attributable to the nominal price/nominal exchange rate relationship. Employing this method on data from “How Wide is the Border?” (1996), this paper finds that the proportion of the border effect directly attributable to a volatile exchange rate and incomplete pass-through varies from good to good. Some goods have a small proportion of their border effect caused by the nominal price/nominal exchange rate relationship (7%-8%), while other goods have a larger proportion, up to 90%.

Suggested Citation

  • Mark David Witte, 2005. "Sticky Prices, a Volatile Exchange Rate and the Border," International Trade 0508010, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpit:0508010
    Note: Type of Document - doc; pages: 23
    as

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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/it/papers/0508/0508010.doc
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    More about this item

    Keywords

    Law of One Price (LOOP); pass-through; border; sticky price; exchange rate;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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