State-dependent pricing, local-currency pricing, and exchange rate pass-through
Anthony Landry ()
No 39, Globalization Institute Working Papers from Federal Reserve Bank of Dallas
This paper presents a two-country DSGE model with state-dependent pricing as in Dotsey, King, and Wolman (1999) in which firms price-discriminate across countries by setting prices in local currency. In this model, a domestic monetary expansion has greater spillover effects to foreign prices and foreign economic activity than an otherwise identical model with time-dependent pricing. In addition, the predictions of the state-dependent pricing model match the business-cycle moments better than the predictions of the time-dependent pricing model when driven by monetary policy shocks.
JEL-codes: F41 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ifn, nep-mon and nep-opm
Note: Published as: Landry, Anthony (2010), "State-Dependent Pricing, Local-Currency Pricing, and Exchange Rate Pass-Through," Journal of Economic Dynamics and Control 34 (10): 1859-1871.
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:39
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