The Canadian border and the US dollar: The impact of exchange rate changes on US retailers

Zhe Chen (), Michael Devereux and Beverly Lapham

Canadian Journal of Economics, 2017, vol. 50, issue 5, 1525-1555

Abstract: This paper provides a micro-level investigation into the impact of changes in the USCanada nominal exchange rate on retailers in US regions lying close to the USCanada border. Using a large data set on product-level retail prices and sales in the United States over a nine year period, we explore the links between changes in exchange rates, cross-border travel and the price and quantity responses of US retailers. This allows us to assess the importance of geography and distance in affecting the pass-through of exchange rate changes into prices and quantities at the level of the consumer. We develop a two-stage theoretical model of cross-border travel and industry equilibrium for retail sales at the border. Our empirical results accord well with the implications of the model.

JEL-codes: F41 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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