Exchange Rate Shocks and the Speed of Trade Price Adjustment

Jimmy Ran and Ronald Balvers

Southern Economic Journal, 2000, vol. 67, issue 1, 200-211

Abstract: A quantity adjustment cost model is developed in the context of international trade along the lines proposed by Krugman (1987). The model implies that prices adjust dynamically to exchange rate fluctuations. The price adjustment speed is determined as a function of foreign demand responsiveness, the appropriate discount rate, and an adjustment cost parameter. Pass‐through is incomplete and increases over time and with the speed of price adjustment. A preliminary empirical analysis finds that the speed of price adjustment from the time series by industry and then in a cross‐sectional regression tentatively relates the obtained adjustment speeds to their theoretical determinants.

Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/j.2325-8012.2000.tb00329.x

Related works:
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:wly:soecon:v:67:y:2000:i:1:p:200-211

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().