Cataloged from PDF version of article.In this thesis, the effect of market power on exchange rate is analyzed in a general
equilibrium Lucas’s tree type model. The basic hypothesis that explains the level of the
exchange rate is the Purchasing Power Parity (PPP), which predicts that money has the same
purchasing power in each country. Research on exchange rates and goods prices has moved to
an examination of the importance of imperfect competition in international markets. In the
field of international economics, models of imperfect competition have been proposed to
explain the response of import and import-competing prices to exchange rate changes. In this
study imperfectly competitive relation between foreign and domestic firms is investigated
under market power. Our theoretical analysis defines and measures the effects of market
power on export and import prices and their relative amounts. Our results indicate that market
power affects the composition of a country’s consumption in terms of import and
domestically produced goods because of the effect on the prices at home and abroad.Vural, HakanM.S
