Document Type : Research Paper

Authors

Department of Economics, University of Mazandaran, Babolsar, Iran

Abstract

The aim of this article is to study the firm-level pricing behavior based on the firm’s competitive strategy through the exchange rate pass-through. Using Iranian export price microdata, we provide new empirical evidence on how firm’s exchange rate pass-through depends on firm’s strategic decisions of competition. After classifying firms in two groups based on their competitive strategies, we show that firms involving in strategic complements pass more exchange rate movements to export prices than firms with strategic substitutions. Furthermore, firms in strategic substitutions tend to increase their export volume significantly more than the firms in strategic complements as a result of the depreciation of exchange rate.

Keywords

Article Title [Persian]

تجزیه و تحلیل تجربی از استراتژی رقابت و نرخ عبور ارز

Authors [Persian]

  • سعید راسخی
  • زهرا شیدایی

Keywords [Persian]

  • استراتژی رقابتی
  • مکمل های استراتژیک
  • عبور از نرخ ارز
  • ایران
References
 
Amirteimoori, S., & Chizari, A. (2010). An investigation of comparative advantage of pistachio production and exports in Iran. Journal of Agricultural Science and Technology, 10, 395-403.
Amiti, M., Itskhoki, O., & Konings, J. (2014). Importers, exporters, and exchange rate disconnect. American Economic Review, 104(7), 1942-1978.
Atkeson, A., & Burstein, A. (2007). Pricing-to-market in a Ricardian Model of International Trade. American Economic Review, 97(2), 362-367.
Auer, R. A., & Schoenle, R. S. (2016). Market structure and exchange rate pass-through. Journal of International Economics, 98, 60-77.
Barhoumi, K. (2006). Differences in long run exchange rate pass-through into import prices in developing countries: An empirical investigation. Economic Modelling, 23(6), 926-951.
Bergin, P. R., & Feenstra, R. C. (2009). Pass‐through of exchange rates and competition between floaters and fixers. Journal of Money, Credit and Banking, 41, 35-70.
Berman, N., Martin, P., & Mayer, T. (2012). How do different exporters react to exchange rate changes? The Quarterly Journal of Economics, 127(1), 437-492.
Bernard, A. B., Eaton, J., Jensen, J. B., & Kortum, S. (2003). Plants and productivity in international trade. American Economic Review, 93(4), 1268-1290.
Bernard, A. B., Jensen, J. B., Redding, S. J., & Schott, P. K. (2009). The margins of US trade. American Economic Review, 99(2), 487-493.
Brander, J., & Krugman, P. (1983). A ‘reciprocal dumping’model of international trade. Journal of international Economics, 15(3-4), 313-321.
Brander, J. A. (1981). Intra-industry trade in identical commodities. Journal of international Economics, 11(1), 1-14.
Brander, J. A., & Spencer, B. J. (2015). Intra-industry trade with Bertrand and Cournot oligopoly: The role of endogenous horizontal product differentiation. Research in Economics, 69(2), 157-165.
Bulow, J. I., & Pfleiderer, P. (1983). A note on the effect of cost changes on prices. Journal of Political Economy, 91(1), 182-185.
Chatterjee, A., Dix-Carneiro, R., & Vichyanond, J. (2013). Multi-product firms and exchange rate fluctuations. American Economic Journal: Economic Policy, 5(2), 77-110.
Coulibaly, D., & Kempf, H. (2010). Does inflation targeting decrease exchange rate pass-through in emerging countries?. Banque de France Working Paper No. 303.
Eaton, J., Kortum, S., & Kramarz, F. (2004). Dissecting trade: Firms, industries, and export destinations. American Economic Review, 94(2), 150-154.
Fisher, E. O. N. (1989). A model of exchange rate pass-through. Journal of international Economics, 26(1-2), 119.
Froeb, L., Tschantz, S., & Werden, G. J. (2005). Pass-through rates and the price effects of mergers. International Journal of Industrial Organization, 23(9-10), 703-715.
Garetto, S. (2016). Firms' heterogeneity, incomplete information, and pass-through. Journal of International Economics, 101, 168-179.
Goldberg, P. K., & Hellerstein, R. (2007). A framework for identifying the sources of local-currency price stability with an empirical application. In: National Bureau of Economic Research Cambridge, Mass., USA.
Goldberg, P. K., & Knetter, M. M. (1996). Goods prices and exchange rates: What have we learned?. NBER Working Paper No. 5862.
Gopinath, G., & Itskhoki, O. (2010). Frequency of price adjustment and pass-through. The Quarterly Journal of Economics, 125(2), 675-727.
Gopinath, G., Itskhoki, O., & Rigobon, R. (2010). Currency choice and exchange rate pass-through. American Economic Review, 100(1), 304-336.
Gopinath, G., & Rigobon, R. (2008). Sticky borders. The Quarterly Journal of Economics, 123(2), 531-575.
Hellerstein, R. (2008). Who bears the cost of a change in the exchange rate? Pass-through accounting for the case of beer. Journal of International Economics, 76(1), 14-32.
Helpman, E., Melitz, M., & Rubinstein, Y. (2008). Estimating trade flows: Trading partners and trading volumes. The Quarterly Journal of Economics, 123(2), 441-487.
Krugman, P. (1980). Scale economies, product differentiation, and the pattern of trade. The American Economic Review, 70(5), 950-959.
Krugman, P. R. (1979). Increasing returns, monopolistic competition, and international trade. Journal of international Economics, 9(4), 469-479.
Lyandres, E. (2006). Capital structure and interaction among firms in output markets: Theory and evidence. The Journal of Business, 79(5), 2381-2421.
Martin, L. M., & Rodriguez, D. R. (2004). Pricing to market at firm level. Review of World Economics, 140(2), 302-320.
Melitz, M. J. (2003). The impact of trade on intra‐industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695-1725.
Melitz, M. J., & Ottaviano, G. I. (2008). Market size, trade, and productivity. The review of economic studies, 75(1), 295-316.
Menon, J. (1996). The degree and determinants of exchange rate pass-through: market structure, non-tariff barriers and multinational corporations. The Economic Journal, 434-444.
Nakamura, E., & Zerom, D. (2010). Accounting for incomplete pass-through. The review of economic studies, 77(3), 1192-1230.
Rasekhi, S., & Sheidaei, Z. (2018). Tariff Pass-through and Firm’s Productivity: A Case Study of Iran. Iranian Economic Review. DOI: 10.22059/IER.2018.68954
Rodriguez-Lopez, J. A. (2011). Prices and exchange rates: A theory of disconnect. The Review of Economic studies, 78(3), 1135-1177.
Shaked, A., & Sutton, J. (1982). Natural oligopolies and international trade: an introduction. STICERD, Theoretical Economics Paper Series 51, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
Sundaram, A. K., John, T. A., & John, K. (1996). An empirical analysis of strategic competition and firm values the case of R&D competition. Journal of Financial Economics, 40(3), 459-486.
Ten Kate, A., & Niels, G. (2005). To what extent are cost savings passed on to consumers? An oligopoly approach. European Journal of Law and Economics, 20(3), 323-337.
Zare Mehrjerdi, M., & Tohidi, A. (2014). An Empirical Analysis of Exchange Rate Pass-Through to Iran's Saffron Export Price. Ethno-Pharmaceutical Products, 1(1), 29-36.
Zhou, D., Spencer, B. J., & Vertinsky, I. (2002). Strategic trade policy with endogenous choice of quality and asymmetric costs. Journal of international Economics, 56(1), 205-232.
Zimmerman, P. R., & Carlson, J. A. (2010). Competition and cost pass-through in differentiated oligopolies. MPRA_paper_25931.