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

Dominique Gross and Nicolas Schmitt

No 1999/047, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; exchange rate; Exchange rate pass-through; Oligopoly; International trade; price interdependence; interdependence matter; price change; cost variation; price effect; B. price rivalry; price series; price decision; exogenous cost variable; C. price dynamics; cost effect; cost model; Exchange rates; Currencies; Exchange rate adjustments; Asset prices (search for similar items in EconPapers)
Pages: 33
Date: 1999-04-01
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Citations: View citations in EconPapers (10)

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Journal Article: Exchange rate pass-through and dynamic oligopoly: an empirical investigation (2000)
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