Importers, Exporters, and Exchange Rate Disconnect

Large exporters are simultaneously large importers. We show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. We develop a theoretical framework with variable markups and imported inputs, which predicts that...

Full description

Saved in:
Bibliographic Details
Published inThe American economic review Vol. 104; no. 7; pp. 1942 - 1978
Main Authors Amiti, Mary, Itskhoki, Oleg, Konings, Jozef
Format Journal Article
LanguageEnglish
Published Nashville American Economic Association 01.07.2014
Subjects
Central banks
Costs
Economic theory
Economics
Equilibrium
Exchange rates
Exporters
Exports
Foreign exchange rates
Import prices
Importers
Imports
International trade
Marginal costs
Market share
Market shares
Markups
Productivity
Studies
Transaction costs
Variable costs
Variance
Western Europe
Belgium
Online AccessGet full text

Cover

More Information
Summary:Large exporters are simultaneously large importers. We show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. We develop a theoretical framework with variable markups and imported inputs, which predicts that firms with high import shares and high market shares have low exchange rate pass-through. We test and quantify the theoretical mechanism using Belgian firm-product-level data on imports and exports. Small nonimporting firms have nearly complete pass-through, while large import-intensive exporters have pass-through around 50 percent, with the marginal cost and markup channels contributing roughly equally.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.104.7.1942