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The Effects of Foreign Exchange Rate Movements on Domestic Prices in the Turkish Manufacturing Industry

Author

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  • Oner Guncavdi

    (Istanbul Technical University)

  • Benan Zeki Orbay

    (Istanbul Technical University)

Abstract

This paper examines the sensitivity of domestic prices in the Turkish manufacturing industry to fluctuations in Exchange rates. In our theoretical model, domestic and foreign firms produce substitutable goods for the domestic market. Some portions of domestic firm’s inputs are assumed to be imported. Results show that sensitivity of domestic prices to movements in exchange rates is closely related to the share of imported inputs in domestic production. However, our results are inconclusive, regarding the effects of market structure on the responsiveness of domestic prices to changes in exchange rate.

Suggested Citation

  • Oner Guncavdi & Benan Zeki Orbay, 2004. "The Effects of Foreign Exchange Rate Movements on Domestic Prices in the Turkish Manufacturing Industry," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 1(1), pages 41-56, Julio-Dic.
    • Handle: RePEc:qua:journl:v:1:y:2004:i:1:p:41-56
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    References listed on IDEAS

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    1. Athukorala, Premachandra & Menon, Jayant, 1995. "Exchange Rates and Strategic Pricing: The Case of Swedish Machinery Exports," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 533-546, November.
    2. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    3. Oner Guncavdi & Benan Zeki Orbay, 2002. "Exchange rates, market structure and price-cost margins: evidence from a developing country," Applied Economics, Taylor & Francis Journals, vol. 34(6), pages 783-789.
    4. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    5. Jaewoo Lee, 1997. "The Response Of Exchange Rate Pass-Through To Market Concentration In A Small Economy: The Evidence From Korea," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 142-145, February.
    6. Feinberg, Robert M, 1991. "The Choice of Exchange-Rate Index and Domestic Price Passthrough," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 409-420, June.
    7. Jiawen Yang, 1997. "Exchange Rate Pass-Through In U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 95-104, February.
    8. Menon, Jayant, 1995. "Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
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    Cited by:

    1. Ülke, Volkan, 2015. "The Degree of Currency Substitution and Exchange Rate Pass-Through," MPRA Paper 75633, University Library of Munich, Germany, revised 15 Dec 2015.

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    More about this item

    Keywords

    exchange rate pass-through; inflation; Turkey;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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