Endogenous exchange rate pass-through when nominal prices are set in advance

• 成果类型: Article
• 署名作者: Devereux, MB; Engel, C; Storgaard, PE
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; University of British Columbia; Centre for Economic Policy Research - UK; National Bureau of Economic Research
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(03)00074-6
• 发表日期: 2004
• 页码: 263-291
• 关键词: exchange rate pass-through; export prices

摘要

This paper develops a model of endogenous exchange rate pass-through within an open economy macroeconomic framework, where both pass-through and the exchange rate are simultaneously determined, and interact with one another, Pass-through is endogenous because firms choose the currency in which they set their export prices. There is a unique equilibrium rate of pass-through under the condition that exchange rate volatility rises as the degree of pass-through falls. We show that the relationship between exchange rate volatility and economic structure may be substantially affected by the presence of endogenous pass-through. Our key results show that pass-through is related to the relative stability of monetary policy. Countries with relatively low volatility of money growth will have relatively low rates of exchange rate pass-through, while countries with relatively high volatility of money growth will have relatively high pass-through rates. (C) 2003 Elsevier B.V. All rights reserved.