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Dynamic Export Pricing and Survey-based Exchange Rate Expectations

Author

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  • Eiichi Tomiura

    (Kobe University)

Abstract

This paper constructs a cutomer market model where an exporting firm lowers the price as the price as the @exchange rate is expected to depreciate. The instrumental @variables method, usually employed in estimating the Euler equation with expected variables, however, is inappropriate to estimate this model since the orthogonality is not satisfied for real-world exchange rate expectations. This paper instead derives expected exchange rates from actual survey data. Our estimates suggest that expectations of future exchange rates alter the current export price in the predicted direction in the case of Japanese machinery and chemical exports.

Suggested Citation

  • Eiichi Tomiura, 2003. "Dynamic Export Pricing and Survey-based Exchange Rate Expectations," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 47, pages 67-81, February.
    • Handle: RePEc:kob:review:feb2003::v:47:p:67-81
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    More about this item

    Keywords

    export price; customer market; exchange rate expectations; survey data;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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