Autore
Herguera, Inigo

Titolo
Exchange rate fluctuations, market structure and the pass-through relationship
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1993 - Fascicolo: 18 - Pagina iniziale: 1 - Pagina finale: 31

Models of imperfect competition have been introduced recently (Dombusch, 1987, Mann, 1989) in order to explain the behavior of prices in international markets. The Law of One Price does not yield a good explanation of prices in the short and medium term. In this paper market structure, the degree of risk aversion and the aggressiveness in the behavior of the firms are shown to be crucial determinants of the response of import prices to exogenous exchange rate fluctuations (i.e. the pass-through relationship). In a Cournot oligopoly model we let a general number of two different types of firms operate in the industry. As the number of firms in the industry increases or as the expected response of the rivals becomes more aggressive, results get closer to what the Law of One Price predicts.



Testo completo: http://hdl.handle.net/1814/459

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