Industry Restructuring, Mark-ups, And Exchange Rate Pass-through

Danny Leung and Beverly Lapham

No 1120, Working Paper from Economics Department, Queen's University

Abstract: Consumer prices are not very responsive to movementsin nominal exchange rates and their response has fallenin Canada since the mid 1980s. This paper explores two of the most likely explanations for this decline in exchange rate pass-throughto consumer prices: (1)lower inflation and (2) restructuring in the retail sector. We believe that both explanations are important but our primary focus in this paper is on the second explanation. We discuss the restructuring that has occurred in Canadian retail and trends in mark-ups and concentration in that sector. We argue that to understand these trends, it is important to examine pass-through in industrialorganization models with strategic elements. Finally, we present a series of such models and evaluate the effects of various forms of restructuring on mark-ups, concentration, and exchange rate pass-through.

Keywords: Pass-Through; Restructuring; Strategic Pricing; Mark-ups; Exchange Rates; Imperfect Competition (search for similar items in EconPapers)
JEL-codes: D40 F15 F31 F41 L16 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2006-10
New Economics Papers: this item is included in nep-cba, nep-com and nep-ifn
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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1120.pdf First version 2006 (application/pdf)

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Working Paper: Industry Restructuring, Mark-ups, and Exchange Rate Pass-Through (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1120

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