Reforms and the Real Exchange Rate: The Role of Pricing-to-Market
Lise Patureau and
Céline Poilly ()
Additional contact information
Lise Patureau: LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine
Working Papers from HAL
The paper investigates how endogenous markups affect the extent to which policy reforms can influence international competitiveness. In a two-country model where trade costs allow for international market segmentation, we show that endogenous pricing-to-market behavior of firms acts as an important transmission channel of the policies. By strengthening the degree of competition between firms, product market deregulation at home leads to a reduction in domestic markups, which generally leads to an improvement in the international competitiveness of the Home country. Conversely, the power of competitive tax policy to depreciate the real exchange rate is dampened, as domestic firms take the opportunity of the labor tax cut to increase their markups. The variability of markups also affects the normative implications of the reforms. This indicates the importance of taking into account endogenous pricing-to-market behavior when intending to correctly evaluate the overall effects of the reforms.
Keywords: endogenous markups; pricing-to-market; endogenous firm entry; fiscal reform; exchange rate; product market deregulation (search for similar items in EconPapers)
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01936854
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Reforms and the Real Exchange Rate: The Role of Pricing-to-Market (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-01936854
Access Statistics for this paper
More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().