Competition and Relative Prices when the Exchange Rate Changes: Evidence from Exporting Companies

Jiri Podpiera and Marie Raková

Czech Journal of Economics and Finance (Finance a uver), 2008, vol. 58, issue 01-02, 38-56

Abstract: In this paper we show the relevance of the degree of competition for inferences about changes in export-production relative prices when the nominal exchange rate changes. We devise a model for tradable goods that combines the market competition and the pricing-to-market literature and we empirically document the contrast between perfectly and imperfectly competitive markets for the export-production relative price responses to exchange rate changes. When the macroeconomic view is taken, a change in the degree of competition in exports (a change in the average mark-up on exported products) alternates the reaction in relative prices and quantity exported and thus requires careful policy-related consideration.

Keywords: degree of competition; exchange rate; pricing-to-market (search for similar items in EconPapers)
JEL-codes: C33 D4 F31 F41 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:58:y:2008:i:1-2:p:38-56

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