Exchange rate pass-through in a competitive model of pricing-to-market

This paper extends the Mussa and Rosen (1978) model of quality-pricing under perfect competition. Exporters sell goods of different qualities to consumers who have heterogeneous preferences for quality. Production is subject to decreasing returns to scale and, therefore, supply and the toughness of competition react to cost changes brought about by exchange rate fluctuations. First, we predict that exchange rate shocks are imperfectly passed through into prices. Second, prices of low quality goods are more sensitive to exchange rate shocks than prices of high quality goods. Third, in response to an exchange rate appreciation, the composition of exports shifts towards higher quality and more expensive goods.> ; We test these predictions using highly disaggregated price and quantity U.S. import data. We find evidence that in response to an exchange rate appreciation, the composition of exports shifts towards high unit price goods. Therefore, exchange rate passthrough rates that are measured using aggregate data will tend to overstate the actual extent of pass-through.Foreign exchange rates ; Econometric models ; International trade

Characterization and Scaling of MOS Flip Flop Performance in Synchronizer Applications

The measured and calculated values of t he Flip Flop parameters needed to specify synchronizer reliability are presented for 3 different depletion-load, silicon gate, NMOS, R-S Flip Flop circuits with gate lengths ranging from 6μm to 4.2μm. Estimates of the probability of synchronizer failure to resolve within allowed or desired times can be determined from these parameters

Cost Pass Through in a Competitive Model of Pricing-to-Market

This paper builds up an extension to the Mussa and Rosen (1978) model of quality pricing under perfect competition. Our model incorporates decreasing returns to scale. First, we predict that exchange rate shocks are imperfectly passed through into prices. Second, prices of low quality goods are more sensitive to exchange rate shocks than prices of high quality goods. Third, in response to an exchange rate appreciation, the composition of exports shifts towards higher quality and more expensive goods. We test those predictions using highly disaggregated price and quantity US import data. We find that the prices of high quality goods, proxied as high unit price goods, are more sensitive to exchange rate movements. Moreover, we find evidence that in response to an exchange rate appreciation, the composition of exports shifts towards high unit price goods.Pricing-to-Market, Exchange Rate Pass Through, Local Distribution

The Network Structure of International Trade

Motivated by empirical evidence I uncover on the dynamics of French firms exports, I offer a novel theory of trade frictions. Firms only export into markets where they have a contact. They directly search for new trading partners, but also use their exist- ing network of contacts to remotely search for new partners. I characterize the dynamic formation of an international network of exporters in this model. I structurally estimate this model on French data and confirm its predictions regarding (i) the cross- sectional distribution of the number of foreign markets accessed by exporters and (ii) the cross-sectional geographic distribution of exports

The Gravity Equation in International Trade: An Explanation

The gravity equation in international trade is one of the most robust empirical finding\ud in economics: bilateral trade between two countries is proportional to their respective sizes,\ud measured by their GDP, and inversely proportional to the geographic distance between them.\ud While the role of economic size is well understood, the role played by distance remains a mystery.\ud In this paper, I propose the first explanation for the gravity equation in international\ud trade. This explanation is based on the emergence of a stable international network of importers\ud and exporters. Firms can only export into markets in which they have a contact. They\ud acquire contacts by gradually meeting the contacts of their contacts. I show that if, as observed\ud empirically, (i) the distribution of the number of foreign countries accessed by exporters is fat\ud tailed, (ii) there is a large turnover in exports, with firms often going in and out of individual\ud foreign markets, and (iii) geographic distance hinders the initial acquisition of contacts\ud in an arbitrary way, then trade is proportional to country size, and inversely proportional to\ud distance. Data on firm level, sectoral, and aggregate trade support further predictions of the\ud model

The Network Structure of International Trade

I build a simple dynamic model of the formation of an international social network of importers and exporters. Firms can only export into markets in which they have a contact. They acquire new contacts both at random, and via their network of existing contacts. This model explains (i) the cross-sectional distribution of the number of foreign markets accessed by individual exporters, (ii) the cross-sectional geographic distribution of foreign contacts, and (iii) the dynamics of firm level exports. I show that the firm level dynamics of trade can explain the observed cross section of firm level exports. All theoretical predictions are supported by the data.

Exchange Rate Pass-Through in a Competitive Model of Pricing-to-Market

This paper extends the Mussa and Rosen (1978) model of quality pricing under perfect competition. Exporters sell goods of different qualities to consumers who have heterogeneous preferences for quality. Production is subject to decreasing returns to scale and, therefore, supply and the toughness of competition react to cost changes brought about by exchange rate fluctuations. First, we predict that exchange rate shocks are imperfectly passed through into prices. Second, prices of low-quality goods are more sensitive to exchange rate shocks than prices of high-quality goods. Third, in response to an exchange rate appreciation, the composition of exports shifts toward higher quality and more expensive goods. We test these predictions using highly disaggregated price and quantity U.S. import data and find only weak empirical evidence in support of our theory

Exchange Rate Pass-Through in a Competitive Model of Pricing-to-Market

This paper extends the Mussa and Rosen (1978) model of quality pricing under perfect competition. Exporters sell goods of different qualities to consumers who have heterogeneous preferences for quality. Production is subject to decreasing returns to scale and, therefore, supply and the toughness of competition react to cost changes brought about by exchange rate fluctuations. First, we predict that exchange rate shocks are imperfectly passed through into prices. Second, prices of low-quality goods are more sensitive to exchange rate shocks than prices of high-quality goods. Third, in response to an exchange rate appreciation, the composition of exports shifts toward higher quality and more expensive goods. We test these predictions using highly disaggregated price and quantity U.S. import data and find only weak empirical evidence in support of our theory

The Collateral Channel: How Real Estate Shocks Affect Corporate Investment

International audienceWhat is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral channel, shocks to the value of real estate can have a large impact on aggregate investment. To compute the sensitivity of investment to collateral value, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. Over the 1993-2007 period, the representative US corporation invests $0.06 out of each$1 of collateral