Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152965
Authors: 
Brissimis, Sophocles N.
Kosma, Theodora
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 531
Abstract: 
This paper examines exchange rate pass-through in the euro area by accounting for the impact of exchange rate changes on exporting firms’ market power, cost structure and competitiveness. An international oligopoly model where exporting firms simultaneously decide on their pricing and innovation strategies is used as the basis for the econometric analysis. The estimations are carried out on data for manufacturing imports of three large euro area countries (Germany, France, Netherlands) from three major non-euro area import suppliers (US, Japan, UK). The results show that exporting firms’ price and innovation decisions in each source country are jointly determined and that total pass-through to euro area import prices is low. There are also indications that other factors, such as interactions with domestic producers, may be important for the determination of pass-through. Finally, euro area import prices are found to be sticky in local currency in the short run.
Subjects: 
euro exchange rate
Exchange Rate Pass-Through
innovative activity
market power
multivariate cointegration
JEL: 
E43
E44
E58
Document Type: 
Working Paper

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