EconPapers    
Economics at your fingertips  
 

Exchange Rate Pass-Through, Currency of Invoicing and Market Share

Michael Devereux (), Wei Dong and Ben Tomlin ()

Staff Working Papers from Bank of Canada

Abstract: This paper investigates the impact of market structure on the joint determination of exchange rate pass-through and currency of invoicing in international trade. A novel feature of the study is the focus on market share of firms on both sides of the market—that is, exporting firms and importing firms. A model of monopolistic competition with heterogeneous firms has the following set of predictions: a) exchange rate pass-through should be non-monotonic and U-shaped in the market share of exporting firms, but monotonically declining in the market share of importers; b) exchange rate pass-through should be lower, the higher is local currency invoicing of imports; and c) producer currency invoicing should be related non-monotonically and U-shaped to exporter market share, and monotonically declining in importing firms’ market share. We test these predictions using a new and large micro data set covering the universe of Canadian imports over a six-year period. The data strongly support all three predictions.

Keywords: Exchange rates; Inflation and prices; Market structure and pricing (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2015
New Economics Papers: this item is included in nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25) Track citations by RSS feed

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2015/08/wp2015-31.pdf

Related works:
Working Paper: Exchange Rate Pass-Through, Currency of Invoicing and Market Share (2015) Downloads
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:bca:bocawp:15-31

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2023-02-01
Handle: RePEc:bca:bocawp:15-31