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Title:Arm's-length transactions as a source of incomplete cross-border transmission: The case of autos PDF Logo
Authors:Hellerstein, Rebecca
Villas-Boas, Sofia Berto
Issue Date:2006
Series/Report no.:Staff Report, Federal Reserve Bank of New York 251
Abstract:A large share of international trade occurs through intrafirm transactions. We show that this common cross-border organization of the firm has implications for the welldocumented incomplete transmission of shocks across such borders. We present new evidence of an inverse relationship between a firm’s outsourcing of inputs and its rate of exchange rate pass-through. We then develop a structural econometric model with final assemblers and upstream parts suppliers to quantify how firms’ organization of their activities across national borders affects their pass-through behavior.
Subjects:exchange rate pass-through, intrafirm trade, outsourcing, vertical contracts
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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