Sellers' local currency pricing or buyers' local currency pricing: does it matter for international welfare analysis?
In: Journal of economic dynamics & control, Band 30, Heft 7, S. 1183-1213
ISSN: 0165-1889
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In: Journal of economic dynamics & control, Band 30, Heft 7, S. 1183-1213
ISSN: 0165-1889
In: Journal of economic dynamics & control, Band 34, Heft 10, S. 1859-1871
ISSN: 0165-1889
In: Journal of Monetary Economics, Band 117, S. 460-472
In: NBER Working Paper No. w25111
SSRN
Working paper
In: Journal of development economics, Band 69, Heft 2, S. 367-391
ISSN: 0304-3878
Currency risk is one of the two components of the total interest rate differential. Hard pegs, such as currency boards, are meant to reduce or even eliminate currency risk, thus reducing domestic interest rates. This paper investigates the patterns and determinants of the currency risk premium in two currency boards - Argentina and Hong Kong. Despite the presumed rigidity of currency boards, the currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. The premium and its term structure depend on domestic and global factors, related to devaluation expectations and risk perceptions. (DSE/DÜI)
World Affairs Online
SSRN
Working paper
In: Journal of development economics, Band 69, Heft 2, S. 367-391
ISSN: 0304-3878
In: International Review of Financial Analysis, Band 17, Heft 4, S. 647-663
SSRN
In: Economia: revista da ANPEC, Band 25, Heft 1, S. 1-31
ISSN: 2358-2820
PurposeBrazil uses the dollar as a vehicle currency to invoice its exports. This fact produces a tendency toward equalizing the prices of products in dollars in the international market and reducing the ability of firms to practice pricing-to-market (PTM). This study aims to evaluate the hypothesis by estimating error correction models in panel data, obtaining estimates of PTM for 25 manufacturing products exported by Brazil between 2010 and 2020.Design/methodology/approachThis study uses the correlated common effect estimator proposed by Pesaran (2006) and Chudik and Pesaran (2015b) to estimate the PTM coefficients.FindingsResults of this study indicate that exporters practice local-currency pricing stability for dollar prices. This study obtains that Brazilian exporters tend to stabilize their dollar price for exports, reducing heterogeneity between destination markets. The results are in agreement with the hypothesis of the prevalence of the coalescing effect of Goldberg and Tille (2008) and lower sensitivity of the markup adjustment to the specific market, as pointed out by Corsetti et al. (2018). The pricing of Brazilian exports in dollars reflects a profit maximization strategy that considers an international price system based on global demand for products.Originality/valueIn addition to analyzing the dollar role in the pricing of Brazilian exports through the triangular decomposition, this study also shows the importance of examining the cross-section dependence of errors, considering the heterogeneous cointegration in export pricing models and producing PTM estimates for short-term and long-term.
In: UNSW Business School Research Paper No. 2015 BFIN 06
SSRN
Working paper
In: American economic review, Band 101, Heft 6, S. 2796-2822
ISSN: 1944-7981
This paper examines optimal monetary policy in an open-economy two-country world with sticky prices under pricing to market. We show that currency misalignments are inefficient and lower world welfare. We find that optimal policy must target consumer price inflation, the output gap, and the currency misalignment. The paper derives the loss function of a cooperative monetary policymaker and the optimal targeting rules. The model is a modified version of Clarida, Galí, and Gertler (JME, 2002). The key change is that we allow pricing to market or local-currency pricing and consider the policy implications of currency misalignments. JEL: E52, F31, F41
In: NBER Working Paper No. w9047
SSRN
In: Revue économique, Band 54, Heft 5, S. 1013
ISSN: 1950-6694
In: Review of financial economics: RFE, Band 20, Heft 2, S. 74-83
ISSN: 1873-5924
AbstractThis study analyses the cross‐country correlation of stock prices (values of firms) using the basic New Open Economy Macroeconomics model. It is shown that cross‐country correlations of stock prices greatly depend on the currency of export pricing in the case of monetary shocks but not notably for temporary technology shocks. In the case of a money supply shock, the producer (local) currency pricing version of the model generates negative (positive) cross‐country correlation of stock prices.
In: Global economic review, Band 46, Heft 2, S. 81-100
ISSN: 1744-3873