Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100444
Authors: 
Enders, Zeno
Buzaushina, Almira
Hoffmann, Mathias
Year of Publication: 
2014
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: International Finance D21-V4
Abstract: 
This paper provides an explanation for the observed decline of exchange rate pass-through into import prices by modeling the effects of financial market integration on the optimal choice of the pricing currency in the context of rigid nominal goods prices. Contrary to previous literature, the interdependence of this choice with an optimal portfolio choice of internationally traded financial assets is explicitly taken into account. In particular, price setters move towards more local-currency pricing while the debt portfolio includes more foreign assets following increased financial integration. Both predictions are in line with novel empirical evidence.
JEL: 
F41
F36
F31
Document Type: 
Conference Paper

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