Forward-Looking Exporters and Exchange Rate Pass-Through: A Micro-Level Investigation
Yao Li () and
Carol Zhao Chen
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Carol Zhao Chen: Department of Economics, Hong Kong University of Science and Technology
No 2015-28, HKUST IEMS Working Paper Series from HKUST Institute for Emerging Market Studies
This paper shows that the pricing behavior of exporting firms exhibits a "forward-looking" nature under sticky prices. It offers a channel by which the expectations of future exchange rates affect current prices. To seek the micro-level evidence, we adopt detailed product-level import data of the United States and firm-product-level export data of China combined with forward premiums to study the exchange rate pass-through. We find that not only current (and past) exchange rate fluctuations but also anticipated future exchange rate changes effectively pass through into current prices, suggesting a potentially important factor in help explaining incomplete exchange rate pass-through.
Keywords: Forward-looking; Price adjustment; Exchange rate pass-through; Sticky price (search for similar items in EconPapers)
JEL-codes: F31 F14 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-opm
Date: 2015-07, Revised 2015-07
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Persistent link: https://EconPapers.repec.org/RePEc:hku:wpaper:201528
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