 Reforms and the real exchange rate: The role of pricing-to-marketReforms and the Real Exchange Rate: The Role of Pricing-to-MarketLise Patureau () and Céline Poilly () Post-Print from HAL Abstract: The paper investigates how endogenous markups affect the extent to which policy reforms can influence international competitiveness. In a two-country model where trade costs allow for international market segmentation, we show that endogenous pricing-to-market behavior of firms acts as an important transmission channel of the policies. By strengthening the degree of competition between firms, product market deregulation at home leads to a reduction in domestic markups, which generally leads to an improvement in the international competitiveness of the Home country. Conversely, the power of competitive tax policy to depreciate the real exchange rate is dampened, as domestic firms take the opportunity of the labor tax cut to increase their markups. The variability of markups also affects the normative implications of the reforms. This indicates the importance of taking into account endogenous pricing-to-market behavior when intending to correctly evaluate the overall effects of the reforms. Keywords: Fiscal reform; Product market deregulation; Endogenous Markups; Pricing-to-market; Exchange rate; Endogenous firm entry (search for similar items in EconPapers) Published in Journal of International Economics, 2019, 119, pp.150-168. ⟨10.1016/j.jinteco.2019.04.005⟩ Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02194106 DOI: 10.1016/j.jinteco.2019.04.005 Access Statistics for this paper More papers in Post-Print from HAL |
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