Exchange Rates and Prices

Rüdiger Dornbusch

American Economic Review, 1987, vol. 77, issue 1, 93-106

Abstract: The adjustment of relative prices to exchange rate movements is explained in an industrial organization approach. Given labor costs in the respective currencies, exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium. The extent of absolute and relative price adjustment is shown to depend on market integration, product substitutability, the relative number of domestic and foreign firms, and the market structure. The impact of exchange rates on prices is illustrated in a variety of approaches including the Cournot, A. Dixit and J. Stiglitz_(1977), and S. Salop_(1979) models. Some empirical evidence is offered in support of the theory. Copyright 1987 by American Economic Association.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (589)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Exchange Rates and Prices (1985)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:77:y:1987:i:1:p:93-106

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().