Exchange rate pass-through in the U.S. automobile market: A cointegration approach |
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| Affiliation: | 1. Department of Finance, Ocean University of China, China;2. Department of Accounting and Information, Ling Tung University, Taiwan;3. Department of Finance, Feng Chia University, Taiwan;1. Department of Economics, Waikato University, New Zealand;2. Facultad de Economía, Universidad del Rosario, Colombia |
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| Abstract: | 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. |
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