Exchange Rate Pass-Through and Dynamic Oligopoly

Exchange Rate Pass-Through and Dynamic Oligopoly

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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.... not be set in the buyera#39;s currency (see Gross and Schmitt, 1996, and Gagnon and Knetter, 1995, for fiirther evidence). ... In their study of the U.S. automobile market, they find that Mazda 323 and Nissan Sentra are close substitutes for Ford anbsp;...

Title:Exchange Rate Pass-Through and Dynamic Oligopoly
Author:Dominique M. Gross, Mr. Nicolas Schmitt
Publisher:International Monetary Fund - 1999-04-01


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