Is Price Adjustment Asymmetric?: Evaluating the Market Share and Marketing Bottlenecks Hypothesis / Michael M. Knetter.

Format:

Book

Author/Creator:

Knetter, Michael M.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4170.

NBER working paper series no. w4170

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Is Price Adjustment Asymmetric?

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1992.

Summary:

The theoretical literature on pricing-to-market has identified two possible reasons why the elasticity of prices to exchange rate changes may be asymmetric across appreciations and depreciations. If firms are attempting to increase market shares in foreign markets subject to the possibility of trade restrictions, then more pricing-to-market may occur during appreciations of the exporter's currency. If firms face capacity constraints in their distribution networks, then pricing-to-market may be exaggerated during periods of depreciation of the exporters currency. This paper uses panel data on German and Japanese 7-digit industry exports to compare these competing explanations for asymmetries in pricing-to-market behavior. While the data seldom reject the null hypothesis of a symmetric response of prices to exchange rates, some industries, notably automobiles, provide empirical support for the market share model. Only a pooled regression with Japanese data supports the marketing bottlenecks model.

Notes:

Print version record

September 1992.