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Exchange Rate Changes and Pricing Behavior of US Exporters
Author(s) -
Yang Jiawen
Publication year - 1996
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.1996.tb00108.x
Subject(s) - monopolistic competition , economics , price elasticity of demand , exchange rate , elasticity (physics) , marginal cost , microeconomics , monetary economics , cross elasticity of demand , econometrics , price elasticity of supply , materials science , composite material , monopoly
This paper studies export pricing behavior following exchange rate changes in US manufacturing industries. Through a monopolistic model, the paper predicts that export prices should change, but less than proportionally, in response to exchange rate changes if either or both demand elasticity and marginal cost are variable. Cross‐industry variation of such price changes can be explained by the difference in demand elasticities between the domestic and the export markets, the elasticity of marginal cost with respect to output. and the export share. These predictions are supported by the empirical findings of the paper.