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Europe > Switzerland

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  • Type: Journal Issue x
  • Automobiles; Other Transportation Equipment; Related Parts and Equipment x
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Cover IMF Working Papers
Exchange Rate Pass-Through and Dynamic Oligopoly: An Empirical Investigation
Dominique M. Gross
and
Mr. Nicolas Schmitt
This paper explicitly takes into account the dynamic oligopolistic rivalry among source producers to evaluate the degree of exchange rate pass-through. Using recent time-series techniques for the case of imported automobiles in Switzerland, the results show that prices are strategic complements and that the degree of pass-through is lower in the long run than in the short run. We attribute this to the fact that, although some rivals match long-term price changes, others do not, inducing the producer who faces a change in exchange rate to absorb a greater proportion of the variation.
Keywords:
WP; exchange rate; Exchange rate pass-through; Oligopoly; International trade; price interdependence; interdependence matter; price change; cost variation; price effect; B. price rivalry; price series; price decision; exogenous cost variable; C. price dynamics; cost effect; cost model; Exchange rates; Currencies; Exchange rate adjustments; Asset prices