Dynamic Export Pricing and Survey-based Exchange Rate Expectations

Eiichi Tomiura

Kobe Economic & Business Review, 2003, vol. 47, 67-81

Abstract: This paper constructs a cutomer market model where an exporting firm lowers the price as the price as the @exchange rate is expected to depreciate. The instrumental @variables method, usually employed in estimating the Euler equation with expected variables, however, is inappropriate to estimate this model since the orthogonality is not satisfied for real-world exchange rate expectations. This paper instead derives expected exchange rates from actual survey data. Our estimates suggest that expectations of future exchange rates alter the current export price in the predicted direction in the case of Japanese machinery and chemical exports.

Keywords: export price; customer market; exchange rate expectations; survey data (search for similar items in EconPapers)
JEL-codes: F12 F14 F31 (search for similar items in EconPapers)
Date: 2003
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