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| Author: | Bacchetta, P. Wincoop, E. van |
| Title: | Why do consumer prices react less than import prices to exchange rates? |
| Journal: | Journal of the European Economic Association
2003 : APR-MAY, VOL. 1:2-3, p. 662-670 |
| Index terms: | Consumers Exchange rates Imports Prices |
| Language: | eng |
| Abstract: | The extent of pass-through of exchange rate changes to consumer prices is much lower than to import prices. One explanation to this are local distribution costs. The authors consider an alternative, complementary explanation based on the optimal pricing strategies of firms. A model is considered where foreign exporting firms sell intermediate goods to domestic firms. |
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