Market Structure and Exchange Rate Exposure: The Case of Consumable Goods

A. Andrikopoulos and X. Dassiou

Working Papers from Department of Economics, City University London

Abstract: We examine the impact of exchange rates on profits and prices in differentiated consumable goods markets. We model the exchange rate exposure of exporting firms operating within a Bertrand or a Cournot setting where between and within competition co-exist. We show that market structure and these two forces determine pass through and exposure. Empirical tests of real and bilateral exchange rate exposure using stock price and profit data confirm a link between the ability of a firm to pass on the exchange rate changes to its customers and the magnitude of the exposure on their rivals.

Keywords: Exchange rate exposure; pass through elasticities; market structure; firm behavior; Between Countries Competition; Within Countries Competition (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:cty:dpaper:16/12

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