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N° 2006-03 |
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| February 2006 |
| Structural Determinants of the
Exchange-Rate Pass-Through |
Guillaume Gaulier
Amina Lahrèche-Révil
Isabelle Méjean |
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| Recent papers have tried to explain incomplete pass-through observed at the aggregate level
by various microeconomic behaviors. This paper assesses some of these explanations, using
product-level estimates of pricing-to-market coefficients obtained from a new database of
bilateral international trade that covers more than 5,000 products and 130 countries. Half of
the industries are found to exhibit pricing-to-market, but the magnitude of the pass-through
is shown to vary widely across sectors, even at the most detailed level. Pricing-to-market
is then shown to be higher in markets where arbitrage is made easier by the existence of
referenced prices, and for final consumption goods. Moreover, competitive pressures faced
by exporting firms are shown to affect pass-through decisions as well: firms tend to price
to market all the less that their market share in the destination market is large, and that the
destination markets are small or concentrated. |
Abstract |
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| Pass-through determinants; product-level analysis; panel data; oligopolistic competition |
Keywords |
| F1, F4 |
JEL classification |
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