An Empirical Analysis of Strategic Competition and Exchange Rate Pass-Through

نویسندگان

1 Department of Economics, University of Mazandaran, Babolsar, Iran

2 Department of Economics, University of Mazandaran, Babolsar, Iran

doi
10.22099/ijes.2019.31929.1530
چکیده

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.

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