The Effects of Foreign Exchange Movements on U.S. Domestic Prices

Feinberg, Robert M.

doi:10.2307/1926908

Cited by 95 publications

(67 citation statements)

References 15 publications

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“…These studies are ad hoc in that they contain no formal explanation for the cause, timing or exact nature of the parameter shifts. Related literature supports the beachhead model by showing that market structure affects foreign firm& pricing behavior (Dornbusch 1987, Feinberg 1986and Masus 1987a (1980)(1981)(1982)(1983)(1984)(1985)(1986)(1987). This argues that the dummies may be insignificant because the coefficients overestimate the true dummy parameters.…”

Section: A Competitivene Effects Of Exchange Bate Shocksmentioning

confidence: 87%

Hysteresis In Import Prices: The Beachhead Effect

Baldwin

1988

321

350

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International economists typically assume that temporary real exchange rate shocks can have only temporary real effects -and no effect at all on the underlying structure of the To show that the theoretical point is not just empirically empty theorizing, we present evidence which suggests that the recent dollar overvaluation is an exaniple of a hysteresis-inducing shock. To this end we demonstate that the pass-through relationship shifted in a manner that is consistent with the nature and timing of the market structure changes predicted by the model. In particular, we find evidence that the structural break occurred during the rising dollar phase rather than in 1985 as is commonly asserted. A direct test of the model is not performed due to data limitations.

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Section: A Competitivene Effects Of Exchange Bate Shocksmentioning

confidence: 87%

Hysteresis In Import Prices: The Beachhead Effect

Baldwin

1988

321

350

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“…Feinberg (1989), Kim (1990), Athukorala and Menon (1994), Goldberg and Knetter (1997), Gagnon and Ihrig (2004), Campa and Goldberg (2005) and Karoro et al (2009)). Despite the growing literature on ERPT, only a few have focused on South Africa.…”

Section: Journal Of Economic and Financial Studies (Jefs)mentioning

confidence: 98%

Inflation targeting and exchange rate pass-through to domestic prices: evidence from South Africa

Oladipo

2017

JEFS

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Inflation targeting is increasingly seen as a crucial monetary policy by many economies in their quest for economic growth. The choice of an appropriate exchange rate regime, continue to be crucial in macroeconomic policy. Using data from 1970q1 to 2015q4, the paper examines the effects of inflation targeting on exchange rate pass-through. Applying a VAR model, the results show that inflation targeting has significant impacts on the movements of inflation, output and the exchange rate. The pass-through to consumer prices decreased and there was a reduction in the influence of foreign producer costs on imports prices after adopting inflation targeting. IntroductionThis paper examines the effects of inflation targeting on exchange rate pass-through in South Africa. After the currency crashes of the late 1990s, a growing number of emerging economies moved away from exchange rate rigidity towards a combination of flexible exchange rates and inflation targeting (IT). Inflation targeting is increasingly seen as a crucial monetary policy by these economies in their quest for economic growth. Since exchange rate is a major determinant of inflation, the choice of an appropriate exchange rate regime, and the broad thrust of exchange rate policy continue to be crucial in macroeconomic policy. The nature and timing of linkages among nominal exchange rate, prices and inflation to a large extent determine the effectiveness of the exchange rate policy. Although exchange rate pass-through (ERPT)-the degree to which changes in exchange rates are transmitted to the domestic prices of both tradable and non-tradable goods and services-has been the subject of several empirical studies, the focus has disproportionately been on industrialized countries and studies that have examined the effects of IT on ERPT in developing countries are relatively few.Exchange rate is one of the macroeconomic fundamentals that significantly affect consumer price inflation. This effect occurs via two channels-direct and indirect. Directly, the exchange rate affects, with a relatively small lag, prices of imported goods, i.e. goods intended directly for the consumer market as well as raw materials and semi-manufactures intended for production of consumer goods of domestic origin. The exchange rate affects not only prices of imported goods, but also-indirectly via import arbitrage-prices of domestic goods which are under competitive pressure from imported goods. With the indirect channel, the change in the exchange rate, all other things being equal, affects the change in the real exchange rate. This, in turn, affects the economy via aggregate demand and a changed output gap. In IT countries, the monetary authority does not directly regulate the exchange rate. However, since changes in the exchange rate also affect inflation, the monetary authority conducts detailed analyses of the exchange rate, and each macroeconomic forecast also contains the internally consistent outlook for the exchange rate. On the one hand, the exchange rate forecast affects futur...

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“…A second innovation of this study is to examine competitive impacts of both net and gross entry. Finally, this study is the first to link an exploration of entry with a body of work on exchange rate impacts on domestic prices (e.g., Feinberg (1989)), with the expectation that a domestic entry effect will be more likely to be accurately observed if other determinants (both foreign and domestic) are better controlled for.…”

Section: Introductionmentioning

confidence: 94%

“…I do not directly control for market structure (including entry barriers) and imports in this paper; however, the former is more likely to impact price levels not the price changes examined here, while the latter is dealt with more appropriately than in the prior work by interacting exchange rate pressures with broad sector import shares to gauge the impact of international shocks. In so doing, the approach is that taken in Feinberg (1989) which focused on exchange rate effects on US domestic prices. Rather than directly control for demand and cost pressures, industry dummies are interacted with an index of real GDP and an aggregate employee compensation index, respectively, to allow each industry's price to reflect these pressures.…”

mentioning

confidence: 99%

Price Impacts of Small-Firm Entry in US Manufacturing

Feinberg

2009

Eastern Econ J

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The Effects of Foreign Exchange Movements on U.S. Domestic Prices

Cited by 95 publications

References 15 publications

Hysteresis In Import Prices: The Beachhead Effect

Hysteresis In Import Prices: The Beachhead Effect

Inflation targeting and exchange rate pass-through to domestic prices: evidence from South Africa

Price Impacts of Small-Firm Entry in US Manufacturing

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