Exchange rate pass-through in Turkish export and import prices

This article investigates the effects of horizontal acquisitions on the performance of target firms in the 1990s. Using French manufacturing firm-level data, we examine two main indicators of performance: the profit and the productive efficiency. We distinguish domestic from cross-border acquisitions. To evaluate the impact of take-overs, we implement appropriate difference-in-difference estimation techniques associated to a matching propensity score procedure. We find that Mergers &?Acquisitions (M&A) do not increase the profit of French target firms, even on the long run. However, they clearly raise the productivity of target firms. These results suggest that firms probably redistribute efficiency gains at the upstream and/or downstream production stage. There is no evidence of an increase in market power. In addition, the consequences of domestic and cross-border M&A significantly differ. Efficiency gains are stronger for cross-border M&A. This conclusion is however true only for extra-European Union operations. The achievement in the European economic integration certainly explains the absence of difference between European and domestic acquisitions. Finally, our results cast some doubt on the frequent discrimination attitude towards foreign takeovers and the fears of their impact on firms’ performance and the host country's welfare.     

Exchange rate pass-through and its determinants in Canadian manufacturing industries

In this paper the pass-through of exchange rate changes into the real prices of domestically produced and imported goods in Canadian manufacturing industries is examined through industry estimates of the pass-through elasticities and a cross-section analysis of their determinants. We find that the domestic pass-through elasticity increases with the effect of the exchange rate on domestic costs of production, the export share, the elasticity of substitution between imports and domestic goods, and the domestic advertising intensity. The import elasticity increases with the elasticity of substitution and the rate of price protection and decreases with advertising intensity. JEL Classification: L60, F14
Les effets de changements dans le taux de change sur les prix réels dans les industries manufacturières canadiennes. Ce mémoire examine les effets des changements dans le taux de change sur les prix réels des biens produits au Canada ou importés pour les industries manufacturières canadiennes en construisant des estimés par secteur des élasticités de transfert et en examinant leurs déterminants dans une analyse trasnversale. On montre que l'élasticité de transfert domestique s'accroît à proportion que l'effet du taux de change sur les coûts internes de production, la part des exportations, l'élasticité de substitution entre importations et biens domestiques, et l'intensité de publicité au plan interne sont importants. L'élasticité des importations s'accroît avec l'élasticité de substitution et le taux de protection des prix, et décroît avec le niveau d'intensité de la publicité.     

Exchange rate pass-through: The case of China

This paper studies the degree of the exchange rate pass-through (ERPT) to import and consumer prices in China with both the ratio of China’s imports to GDP and domestic prices of China’s main trade partners going up. Statistic results show that the degree of ERPT is somehow less than the degree of marginal cost plus mark-up pass-through of exporters, and econometric analyses reach the same conclusion. Besides, the ERPT to import prices is found to be high while the ERPT to CPI is low owing to some factors that obstruct the import prices pass-through channel to domestic CPI. But this situation has been changing significantly since August 2005. Thus, a more flexible exchange rate system is needed for China to absorb the price shock from aboard efficiently.     

Exchange rate pass-through, menu costs and threshold cointegration

This paper investigates exchange rate pass-through (ERPT) in the presence of menu costs. Assuming exports prices are negotiated in the exporter’s currency, menu costs give rise to two thresholds around (within) which incomplete ERPT is (not) observed. An error correcting process is triggered from a deviation in the ERPT cointegrating relation only when the deviation is large enough in absolute value to fall outside of a band defined by symmetric thresholds. Threshold autoregressive (TAR) cointegration techniques are used to investigate Quebec and Ontario pork meat export prices in the US and Japanese markets. Through Monte Carlo simulations, we find that our Equilibrium-TAR tests have greater power than a standard unit root test. Our empirical application suggests that Canadian pork exporters exercise market power in the US market. The evidence of incomplete ERPT in the Japanese market is weaker and differs across provinces. Evidence of thresholds is reported for both destinations, thus indicating the existence of significant menu costs for Canadian pork exporters in these markets.     

Exchange rate and inflation dynamics in dollarized economies

We use a panel of a hundred-plus countries with differing degrees of dollarization to perform an empirical analysis of the effects on inflation of exchange rate depreciations. The results qualify the common view that countries with higher dollarization exhibit higher inflation pass-through. We show that large depreciations tend to generate a negative impact on the pass-through coefficient, this impact being more intense the higher the level of dollarization of the economy. We interpret this as evidence that, in highly dollarized economies, the classic inflationary effects of a real depreciation—higher internal demand and imported inflation—can be offset or diminished by both the larger financial costs and the balance-sheet effect, especially if the depreciation is “large”. Additionally, the exchange rate regime is shown to matter: countries with fixed exchange rates suffer more noticeably the balance-sheet effects of large depreciations.     

Exchange rate pass-through in deflation: The case of Taiwan

This paper incorporates deflation in an analysis of the relationship between the exchange rate pass-through and inflation. Using a nonlinear model based on monthly data of Taiwan's import prices from 1981 to 2008, we find that the degree of exchange rate pass-through is increasing in deflation. The increase becomes smaller when the price of oil is excluded. Evidence for pass-through increasing in deflation has not previously been found in the existing literature and presents a new understanding of the pricing behavior of firms. Poor profits in deflation cause firms to pass through most of the cost of exchange rate changes to their products to avoid exiting the market.     

Exchange rate pass-through in Canadian manufacturing: its direct and indirect components

Changes in the exchange rate have direct and indirect effects on the prices of domestically produced goods and imports in the domestic market. The direct effects originate with the impact of the exchange rate on the marginal cost of imports; the indirect effects, with its impact on the price of materials used by domestic producers and hence on their marginal costs. Direct and indirect exchange rate pass-through elasticities are estimated for 37 Canadian manufacturing industries and their determinants are examined in a cross-section analysis. It is found that the direct and indirect elasticities are approximately equal in size for domestic goods, while the direct effect is dominant for imports. For a small number of industries, the net result of the direct and indirect effects is that a depreciation of the domestic currency increases the competitiveness of imports, contrary to conventional analysis. Important determinants of the direct (indirect) elasticities are the import share and non-tariff barriers (the responsiveness of domestic costs to changes in the exchange rate, and concentration).     

Exchange rate pass-through in a small open economy: the Anglo-Irish case

Bilateral import unit values are constructed to investigate the extent and speed of exchange rate and production cost pass-through into the unit values of Irish imports (total and sectoral) from the UK using Menon's (1996 Menon, J. 1996. The degree and determinants of exchange rate pass-through: market structure, non-tariff barriers and multinational corporations. Economic Journal, 106(435): 434–44.  ) mark-up model. The approach used to measure exchange rate pass-through is based on cointegration and error-correction modelling and the period of analysis is from 1979 to 1995. Full pass-through from the bilateral Irish pound–Sterling exchange rate and from UK producer costs could not be rejected for total and sectoral import unit values for the sample period 1979q1–1995q4. This implies no role for domestic competing prices in explaining the long-run relationship determining unit values of Irish imports from the UK. The results indicate that for aggregate and sectoral unit values of Irish imports from the UK pass-through is incomplete in the short-run.     

Exchange rate pass-through in New Member States and candidate countries of the EU

This paper studies the degree of exchange rate pass-through to the prices of imports of some New Member States (NMSs) of the European Union plus Turkey, coming from the euro area. I estimate industry-specific rates of pass-through across and within countries using the methodology proposed by Campa and González-Mínguez [Campa, J.M. and González-Mínguez, J.M. (2006). Differences in Exchange Rate Pass-Through in the Euro Area. European Economic Review, 50, 121–145.] which estimates the short- and long-run pass-through elasticities. I did not find evidence either in favour of the hypothesis of Local Currency Pricing (zero pass-through) or the hypothesis of Producer Currency Pricing (complete pass-through) for all the countries except for Slovenia and Cyprus. With reference to the results by industry, the lowest values for exchange rate pass-through are in Manufacturing sectors. However, I did observe a exchange rate pass-through decline through the pricing chain.     

Exchange rate pass-through,price discrimination,and US meat export prices

Exports are becoming increasingly important for US livestock and poultry producers. Consequently, meat industry participants are concerned about the potential impacts of variations in relative currency values. These effects are considered by quantifying the impacts of relative exchange rates on US beef, pork and poultry export prices. In addition, the impacts of GATT and NAFTA agreements on exchange rate pass-through are considered. The results indicate incomplete exchange rate pass-through occurs for several countries. Trade liberalization under GATT has positively influenced US beef and poultry export prices.     

Exchange rate policy and imported inflation in a credit rationing economy

The paper assesses the effects of exchange rate policies and imported inflation in the case of Finland, which is a small open economy with underdeveloped financial markets. Under such circumstances interest rates do not necessarily equilibrate the credit market, so that a simplified theoretical disequilibrium model with credit rationing is first presented. In the second part of the paper the Bank of Finland quarterly econometric model for the Finnish economy is simulated. The most important conclusion to emerge from the simulations with the quarterly model is that the effects are highly dependent on the credit market conditions.     

Exchange rate pass-through in the U.S. market: A cross-country and cross-product investigation

Foreign exporters in general and Japanese exporters in particular have been observed to price to market in the U.S. Are there significant differences in the pricing behavior among exporters from different countries? Is the Japanese export pricing behavior unique? This paper addresses these questions and finds that while there is obvious variation in exchange rate pass-through among products, which relates significantly to the degree of product differentiation, no single exporter to the United States is unique in their pricing behavior.     

Canadian inflation targeting

This paper examines the intellectual environment in Canada that led to the adoption of inflation targets starting in 1991, reviews some of the Canadian contributions to the vast literature on inflation targeting and presents evidence in support of the view that the implementation of inflation targeting in Canada has been particularly successful when compared with the experiences of other inflation‐targeting countries and the US.     

Exchange rate pass-through in the U.S. automobile market: A cointegration approach

This study analyzes exchange rate pass-through in the presence of monopolistic competition in the U.S. automobile market. Using cointegration techniques, we investigate how foreign competing firms' prices interact following an exchange rate-shock. The results generally indicate price interdependence (competition) among the rival firms. In one case where we did not find any price interdependence, the extent of exchange rate pass-through was higher. This validates the economic intuition that a low degree of price competition corresponds with a high degree of exchange rate pass-through.     

Market power and exchange rate pass-through

In this paper we provide new empirical evidence on the relationship between market power, as measured by market share, and incomplete exchange rate pass-through. The role of market power is examined in the context of a Cournot model, which is estimated with data relating to Japan's presence in the US market. To test for the existence of possible aggregation biases due to sectoral heterogeneity, estimations are carried out on time series data for the total economy and the manufacturing sector and on panel data for five manufacturing industries at the three-digit level of classification, using the Johansen multivariate cointegration technique and the recently developed by [Larsson, R., Lyhagen, J., & Lothgren, M. (2001). Likelihood-based cointegration tests in heterogeneous panels. Econometrics Journal, 4, 109–142] multivariate panel cointegration technique. Hypotheses about the degree of pass-through are tested as restrictions on estimated equilibrium pricing equations and robustness tests are performed. The empirical results indicate that Japanese firms have market power and this validates the use of an imperfect competition model. However, it appears that market power is not the only element on which to base the analysis of the incomplete exchange rate pass-through by Japanese firms.     

Exchange rate pass-through to domestic producer prices: Evidence from Korean firm-level pricing survey

This note studies exchange rate pass-through to the prices of domestically produced goods, exploring the firm-level pricing survey conducted by the Bank of Korea. The data reveal the imported inputs channel of, as well as nonlinear and asymmetric, exchange rate-pass-through.     

Understanding changes in exchange rate pass-through

Recent research suggests that there has been a decline in the extent to which firms “pass-through” changes in exchange rates to prices. This paper provides further evidence in support of this claim. Additionally, it proposes an explanation for this phenomenon. The paper then presents empirical evidence of a structural break during the 1990s in the relationship between the real exchange rate and CPI inflation for a set of fourteen OECD countries. It is suggested that the recent reduction in the real exchange rate pass-through can in part be attributed to the low inflationary environment of the 1990s.     

Exchange rate regimes and inflation: only hard pegs make a difference

Abstract.  Using data from a large sample of developing countries from 1985 to 2001, we confirm that hard pegs (currency boards or a shared currency) reduce inflation and money growth. There is no evidence that soft pegs confer any monetary discipline, after other factors are controlled for. Inflation triggers regime switches. Under hard pegs, monetary growth is unaffected by fiscal deficits or by inflation shocks. Under soft pegs, as under floats, increased fiscal deficits and positive inflation shocks are associated with higher monetary growth. The apparently slower per capita output growth under hard pegs is explained by their geographical distribution. JEL classification: F41