Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7366343 | Journal of International Money and Finance | 2013 | 14 Pages |
Abstract
This study proposes a new approach to tests of pricing-to-market, which defines the responsiveness of export prices to currency movements. Pricing-to-market parameters may be susceptible to time variation, and we account for this in a novel theoretical and empirical contribution to the literature. We extend the benchmark model of pricing-to-market to account for instability in the relationship between export prices and exchange rates. Moreover, using an empirical methodology robust to parameter instability, we examine the forecasting performance of a pricing-to-market model. In doing so we apply a selection of model mis-specification tests robust to varying degrees of parameter evolution to recent aggregate and disaggregate UK export data. Our estimation results provide strong evidence of pricing-to-market and the instability in the response of export prices to exchange rate fluctuations.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Joseph P. Byrne, Ekaterina Kortava, Ronald MacDonald,