State dependent pricing, invoicing currency, and exchange rate pass-through

Flodén, Martin; Wilander, Fredrik

doi:10.1016/j.jinteco.2005.08.002

Cited by 40 publications

(26 citation statements)

References 29 publications

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“…We find that, within the group of emerging floaters, estimated pass-throughs are higher for countries with greater nominal exchange rate volatilities and that trade more homogeneous goods. These findings are consistent with the pass-through model of Floden and Wilander (2006) and earlier findings by Campa and Goldberg (2005), respectively. Furthermore, we find that the Indonesian Rupiah, the Thai Baht and possibly the Mexican Peso are commodity currencies, in the sense that their real exchange rates are cointegrated with international commodity prices.…”

Section: Introductionsupporting

confidence: 93%

“…Passthroughs however are clearly increasing in the volatility of the exchange rate and in the participation of homogeneous products in trade flows. The former effect is consistent with the model of Floden and Wilander (2006) that features local currency pricing and price-setters that follow S-s type adjustment rules, whereas the latter is in line with the findings of Goldberg (2001, 2005) for developed countries. Moreover, the fact that exchange rate volatility is associated with higher -and not lower -pass-throughs, contradicts the mechanisms highlighted by Froot and Klemperer (1989), Krugman (1989) and Devereux and Engel (2002).…”

Section: Introductionsupporting

confidence: 89%

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Emerging floaters: Pass-throughs and (some) new commodity currencies

Kohlscheen

2010

Journal of International Money and Finance

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In spite of early skepticism on the merits of floating exchange rate regimes in emerging markets, 8 of the 25 largest countries in this group have now had a floating exchange rate regime for more than a decade. Using parsimonious VAR specifications covering the period of floating exchange rates, this study finds that exchange rate pass-throughs to consumer price indices in these emerging floaters have typically been moderate even though emerging floaters have seen considerable nominal and real exchange rate volatilities. Previous studies that set out to estimate exchange rate pass-throughs ignored changes in policy regimes, making them vulnerable to the Lucas critique. We find that, within the group of emerging floaters, estimated pass-throughs are higher for countries with greater nominal exchange rate volatilities and that trade more homogeneous goods. These findings are consistent with the pass-through model of Floden and Wilander (2006) and earlier findings by Campa and Goldberg (2005), respectively. Furthermore, we find that the Indonesian Rupiah, the Thai Baht and possibly the Mexican Peso are commodity currencies, in the sense that their real exchange rates are cointegrated with international commodity prices.

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Section: Introductionsupporting

confidence: 93%

Section: Introductionsupporting

confidence: 89%

Emerging floaters: Pass-throughs and (some) new commodity currencies

Kohlscheen

2010

Journal of International Money and Finance

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“…1 0 See, also, Floden and Wilander (2006) for the theoretical link between …rms'price adjustments and invoicing currency choice, and for the empirical evidence from the US.…”

Section: A Fundamental Question Then Ismentioning

confidence: 99%

Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data

Chung

2016

Journal of International Economics

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A signi…cant proportion of international trade is in intermediate goods. This paper considers theoretically and empirically how exporters' dependence on imported inputs a¤ects their choice of invoicing currency. The model predicts that exporters that depend more on foreign currency-denominated inputs are less likely to price in their home currency. I test this and other theoretical results using a novel dataset that covers UK trade transactions with non-EU countries. I …nd considerable support for the model's predictions. A 10 percentage point higher share of foreign currency-denominated inputs is associated with a 20 percentage point higher probability of pricing in the same foreign currency relative to the producer's currency.JEL Classi…cation: F1, F31, F41.

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“…Additionally, a few papers demonstrate that the higher is inflation in a country, the bigger is ERPT asymmetry (Flodén, Wilander, 2006). …”

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confidence: 99%