On the Relationship between Pass-Through and Sticky Nominal Prices

The paper draws a link between the conditions for low pass-through when there are flexible prices, and local-currency pricing when there are sticky nominal prices. It shows that the condition under which pass-through is less than one-half when prices are flexible is the same as the condition under which exporting firms set prices in the currency of importing countries when nominal prices must be set in advance.

[1]  P. Bacchetta,et al.  A Theory of the Currency Denomination of International Trade , 2002, SSRN Electronic Journal.

[2]  Kenneth S. Rogoff,et al.  Exchange Rate Dynamics Redux , 1994, Journal of Political Economy.

[3]  M. Devereux,et al.  Exchange rate dynamics in a model of pricing-to-market , 2000 .

[4]  B. Aw.  Price discrimination and markups in export markets , 1993 .

[5]  Frank Verboven,et al.  The Evolution of Price Dispersion in the European Car Market , 1998 .

[6]  Kenneth S. Rogoff,et al.  New Directions for Stochastic Open Economy Models , 1999 .

[7]  M. Eichenbaum,et al.  Why are Rates of Inflation so Low after Large Devaluations? , 2002 .

[8]  M. Devereux,et al.  The exchange rate in a model of pricing-to-market , 1996 .

[9]  Ellen R. McGrattan,et al.  Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates? , 2000 .

[10]  M. Eichenbaum,et al.  Why is Inflation so Low after Large Devaluations , 2003 .

[11]  R. Feenstra,et al.  Pass-through of exchange rates and purchasing power parity , 1997 .

[12]  M. Knetter,et al.  Measuring the Intensity of Competition in Export Markets , 1995 .

[13]  M. Knetter,et al.  Goods Prices and Exchange Rates: What Have We Learned? , 1996 .

[14]  P. Krugman,et al.  Pricing to Market When the Exchange Rate Changes , 1986 .

[15]  R. Feenstra.  Symmetric Pass-Through of Tariffs and Exchange Rates Under Imperfect Competition: an Empirical Test , 1987 .

[16]  Richard Friberg.  In which currency should exporters set their prices , 1998 .

[17]  R. Marston.  Pricing to Market in Japanese Manufacturing , 1989 .

[18]  A. Giovannini.  Exchange rates and traded goods prices , 1988 .