Market Structure and the Persistence of Sectoral Real Exchange Rates / Yin-Wong Cheung, Menzie D. Chinn, Eiji Fujii.

Format:

Book

Author/Creator:

Cheung, Yin-Wong.

Contributor:

National Bureau of Economic Research.

Chinn, Menzie D.

Fujii, Eiji.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7408.

NBER working paper series no. w7408

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

We examine the relationship between market structure and the persistence of U.S. dollar-based sectoral real exchange rates for fourteen OECD countries. Our empirical results based on disaggregated data suggest that differences in market structure significantly determine the rates at which deviations from sectoral purchasing power parity decay. Specifically, industries with a larger price-cost margin are found to exhibit slower parity reversion of their sectoral real exchange rates. Further, as the degree of intra-industry trade activity increases, sectoral real exchange rate persistence becomes more pronounced. These findings imply that an imperfectly competitive market structure contributes to the well-documented persistence in real exchange rates.

Notes:

Print version record

October 1999.