and Anders Vredin
Annika Alexius: Central Bank of Sweden, Postal: Central Bank of Sweden, 103 37 Stockholm, Sweden
Anders Vredin: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 103 83 Stockholm, Sweden
Abstract: In this paper fluctuations in prices of Swedish exports to five countries are investigated in order to test whether there are systematic differences between prices to different markets and whether relative export prices are systematically affected by macroeconomic conditions in destination countries. Simple correlations suggest that relative export prices are related to real exchange rates, but also to nominal exchange rates. Formal tests, based on an error-correction model, indicate that the deviations from no pricing-to-market and neutrality of money are quite common and persistent. Over a sample of 15 years, long run monetary neutrality is rejected in almost half of the cases. In most cases, the degree of pricing-to-market is also affected by aggregate demand (unemployment) in export markets.
40 pages, December 1996
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