Exchange Rate Pass-Through in the Euro Area: The Role of Asymmetric Pricing Behavior

Market Power, Innovative Activity and Exchange Rate Pass-Through

“…Thus, there is evidence of a significant degree of local currency pricing at least among the major exporters to the euro area 50 . These results are in accordance with the results of Faruquee (2004) who also finds that euro area import prices are sticky in local currency. Indeed, Hartman (1998) reports that before 1998 a significant proportion of the individual euro area countries' trade was denominated in their currencies.…”

“…The US-France, US-Germany and US-Netherlands models are estimated with 5, 3 and 3 lags, respectively. obtained by Anderton (2003) and Warmedinger (2004), but are lower than those of Faruquee (2004). The empirical analysis in these studies differs from ours in two respects.…”

“…The empirical analysis in these studies differs from ours in two respects. First, these authors use data at different levels of aggregation -euro area import price data (Anderton, 2003;Faruquee, 2004) or import price data at the country level but not disaggregated according to import suppliers (Warmedinger, 2004). Further, they do not account for the indirect effects exchange rates may have on exporting firms' cost structure and competitiveness.…”

“…Further, they do not account for the indirect effects exchange rates may have on exporting firms' cost structure and competitiveness. However, they include variables that account for competition from domestic firms (Anderton, 2003;Warmedinger, 2004) and for the feedback of import prices to domestic competitors' prices (Faruquee, 2004).…”

“…The majority of the studies, however, are based on data for the US. The empirical evidence on the euro area exchange rate pass-through on the other hand is limited (Campa and Minguez, 2004;Anderton, 2003;Warmedinger, 2004 andFaruquee, 2004).…”