Exchange Rate Pass-Through and Dynamic Oligopoly: An Empirical Investigation

April 1, 1999

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Format: Chicago

Dominique M. Gross, and Nicolas Schmitt. Exchange Rate Pass-Through and Dynamic Oligopoly: An Empirical Investigation, (USA: International Monetary Fund, 1999) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper explicitly takes into account the dynamic oligopolistic rivalry among source producers to evaluate the degree of exchange rate pass-through. Using recent time-series techniques for the case of imported automobiles in Switzerland, the results show that prices are strategic complements and that the degree of pass-through is lower in the long run than in the short run. We attribute this to the fact that, although some rivals match long-term price changes, others do not, inducing the producer who faces a change in exchange rate to absorb a greater proportion of the variation.

Subject: Asset prices, Currencies, Exchange rate adjustments, Exchange rate pass-through, Exchange rates, Foreign exchange, Money, Prices

Keywords: Asset prices, B. price rivalry, C. price dynamics, Cost effect, Cost model, Cost variation, Currencies, Exchange rate, Exchange rate adjustments, Exchange rate pass-through, Exchange rates, Exogenous cost variable, Interdependence matter, International trade, Oligopoly, Price change, Price decision, Price effect, Price interdependence, Price series, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/047
Stock No:

WPIEA0471999
ISBN:

9781451846621
ISSN:

1018-5941

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