Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
962874 | Journal of International Economics | 2006 | 19 Pages |
Abstract
We analyze exchange rate pass-through and volatility of import prices in a dynamic framework where firms are subject to menu costs and decide on price adjustments in response to exchange rate innovations. The exchange rate pass-through and import price volatility then depend on the invoicing currency in combination with functional forms of cost and demand functions. In particular, there is lower pass-through, less frequent price adjustments, and lower price volatility when prices are set in the importer's currency than when prices are set in the exporter's currency.
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Martin Flodén, Fredrik Wilander,