Non-Price Competition and Exchange Rate Pass-Through

No ECO2007/54, Economics Working Papers from European University Institute

Abstract: A substantial body of empirical works document that exchange rate pass-through to consumer prices is incomplete. This evidence has cast doubts on the ability of flexible exchange rates to generate expenditure switching. In a dynamic stochastic discrete-time duopoly game, non-price competition among .rms endogenously originates a degree of exchange ratepass-through close to zero together with an expenditure switching e¤ect stronger than in the standard models.

Keywords: pass-through; non-price competition; expenditure switching (search for similar items in EconPapers)
JEL-codes: F40 L16 (search for similar items in EconPapers)
Date: Written 2007
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