Importers, Exporters, and Exchange Rate Disconnect
- (pp. 1942-78)
AbstractLarge 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.
Citation2014. "Importers, Exporters, and Exchange Rate Disconnect." American Economic Review, 104 (7): 1942-78. DOI: 10.1257/aer.104.7.1942
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F14 Empirical Studies of Trade
- F31 Foreign Exchange
- L60 Industry Studies: Manufacturing: General