Working Papers, Konjunkturinstitutet - National Institute of Economic Research
Exchange Rates, Wages, and Export Price Dynamics
Abstract: In this paper, the effects on export prices (in the
currency of the exporter) of shocks to the exchange rate, the exporting
firms' costs and foreign prices are investigated. The theoretical analysis
is done with alternative assumptions regarding the currency in which prices
are set and the desired markup. After that, a VAR-framework is used to
analyze which theory predicts actual outcome the best.
indicate that export prices (in the currency of the exporter) respond
strongly to exchange rate shocks and the effects seem to be in line with
the theory of producer currency pricing and pricing to market. Wage shocks
have insignificant effects.
Keywords: Vector autoregression; exchange rates; export prices; local currency pricing; producer currency pricing; pricing to the market; (follow links to similar papers)
JEL-Codes: E31; F14; F31; (follow links to similar papers)
51 pages, November 26, 2013
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