IDEAS home Printed from https://ideas.repec.org/p/fip/fedgif/389.html
   My bibliography  Save this paper

Pricing to market in international trade: evidence from panel data on automobiles and total merchandise

Author

Listed:
  • Joseph E. Gagnon
  • Michael M. Knetter

Abstract

This paper focuses on price discrimination in international trade that is associated with movements in exchange rates. This phenomenon is referred to as \"pricing to market.\" We find strong evidence of pricing to market for Japanese exports of automobiles. We find moderate evidence of such behavior for German auto exports, and very little pricing to market for U.S. auto exports. We conjecture that these sharp differences in export pricing behavior may be due to differences in the extent of overseas production by firms based in these countries. Pricing to market may be more important to firms that do not have plants in their target markets. ; The patterns observed for automobiles do not hold up for total merchandise exports, where pricing to market varies by both source and destination country. These differences in measured pricing to market may reflect differences in the product mix of trade by source and destination.

Suggested Citation

  • Joseph E. Gagnon & Michael M. Knetter, 1990. "Pricing to market in international trade: evidence from panel data on automobiles and total merchandise," International Finance Discussion Papers 389, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:389
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/pubs/ifdp/1990/389/default.htm
    Download Restriction: no
    File URL: http://www.federalreserve.gov/pubs/ifdp/1990/389/ifdp389.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
    2. Robert C. Feenstra, 1988. "Quality Change Under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(1), pages 131-146.
    3. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
    4. Kasa, Kenneth, 1992. "Adjustment costs and pricing-to-market theory and evidence," Journal of International Economics, Elsevier, vol. 32(1-2), pages 1-30, February.
    5. Gagnon, Joseph E., 1989. "Adjustment costs and international trade dynamics," Journal of International Economics, Elsevier, vol. 26(3-4), pages 327-344, May.
    6. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang, Jiawen, 1995. "Exchange rate pass-through in the U.S. market: A cross-country and cross-product investigation," International Review of Economics & Finance, Elsevier, vol. 4(4), pages 353-371.
    2. Andrew M. Warner, 1992. "Import demand and supply with relatively few theoretical or empirical puzzles," International Finance Discussion Papers 433, Board of Governors of the Federal Reserve System (U.S.).
    3. repec:zbw:bofrdp:1996_026 is not listed on IDEAS
    4. Feenstra, Robert C. & Gagnon, Joseph E. & Knetter, Michael M., 1996. "Market share and exchange rate pass-through in world automobile trade," Journal of International Economics, Elsevier, vol. 40(1-2), pages 187-207, February.
    5. Alexandr Knobel, 2010. "Factors of important Tariff Information," Research Paper Series, Gaidar Institute for Economic Policy, issue 143P.
    6. Yousefi, Ayoub & Wirjanto, Tony S., 2003. "Exchange rate of the US dollar and the J curve: the case of oil exporting countries," Energy Economics, Elsevier, vol. 25(6), pages 741-765, November.
    7. Ayoub Yousefi, 2000. "Merchandise Trade Balances of Less Developed Countries and Exchange Rate of the U.S. Dollar: Cases of Iran, Venezuela & Saudi Arabia," Working Papers 00002, University of Waterloo, Department of Economics, revised Feb 2000.
    8. Ketelsen, Uwe & Kortelainen, Mika, 1996. "The pass-through of exchange rate changes to import prices," Research Discussion Papers 26/1996, Bank of Finland.
    9. Yang, Jiawen, 1998. "Pricing-to-market in U.S. imports and exports: A time series and cross-sessional study," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 843-861.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gagnon, Joseph E. & Knetter, Michael M., 1995. "Markup adjustment and exchange rate fluctuations: evidence from panel data on automobile exports," Journal of International Money and Finance, Elsevier, vol. 14(2), pages 289-310, April.
    2. 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.
    3. Michael M. Knetter, 1992. "Exchange Rates and Corporate Pricing Strategies," NBER Working Papers 4151, National Bureau of Economic Research, Inc.
    4. Goldberg, Pinelopi Koujianou & Knetter, Michael M., 1999. "Measuring the intensity of competition in export markets," Journal of International Economics, Elsevier, vol. 47(1), pages 27-60, February.
    5. Jimmy Ran & Ronald Balvers, 2000. "Exchange Rate Shocks and the Speed of Trade Price Adjustment," Southern Economic Journal, John Wiley & Sons, vol. 67(1), pages 200-211, July.
    6. Saghaian, Sayed H. & Reed, Michael R., 2004. "Integrating Marginal Cost into Pricing-to-market Models for U.S. Agricultural Products," CAFRI: Current Agriculture, Food and Resource Issues, Canadian Agricultural Economics Society, issue 5, pages 1-17, July.
    7. Tantirigama, Mangalika & Lee, Minsoo & Sanyal, Amal, 2008. "New Zealand's Pastoral Exports: Can Small Countries Practise Pricing-to-Market?," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 4(1-2), pages 1-15.
    8. John R. Baldwin & Beiling Yan, 2007. "Exchange Rate Cycles and Canada/US Manufacturing Prices," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(3), pages 508-533, October.
    9. Jeffrey Frankel & David Parsley & Shang-Jin Wei, 2012. "Slow Pass-through Around the World: A New Import for Developing Countries?," Open Economies Review, Springer, vol. 23(2), pages 213-251, April.
    10. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
    11. Marazzi, Mario & Sheets, Nathan, 2007. "Declining exchange rate pass-through to U.S. import prices: The potential role of global factors," Journal of International Money and Finance, Elsevier, vol. 26(6), pages 924-947, October.
    12. Kiliç, Rehim, 2016. "Regime-dependent exchange-rate pass-through to import prices," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 295-308.
    13. Lambelet, Jean-Christian & Mihailov, Alexander, 2005. "The Triple-Parity Law," Economics Discussion Papers 8896, University of Essex, Department of Economics.
    14. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    15. Lucio Sarno & Mark P. Taylor, 2002. "Purchasing Power Parity and the Real Exchange Rate," IMF Staff Papers, Palgrave Macmillan, vol. 49(1), pages 1-5.
    16. Bong-Tae Kim, 2018. "Pricing Behavior for Sustainably Farmed Fish in International Trade: The Case of Norwegian Atlantic Salmon ( Salmo salar )," Sustainability, MDPI, vol. 10(12), pages 1-14, December.
    17. Froot, Kenneth A. & Rogoff, Kenneth, 1995. "Perspectives on PPP and long-run real exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688, Elsevier.
    18. Fedoseeva, Svetlana, 2013. "Do German exporters PTM? Searching for right answers in sugar confectionery exports," Discussion Papers 62, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
    19. Cho, Guedae & Jin, Hyun Joung & Koo, Won W., 2002. "Measuring The Market Power Of The U.S. Wheat Exporters In Asian Countries: An Issue About Adjustment Of Nominal Exchange Rate When Using As A Cost Shifter; The Competitiveness Of The U.S. Wheat Export," 2002 Annual meeting, July 28-31, Long Beach, CA 19885, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Oluremi Ogun, 2000. "Exchange Rate Changes and Export Prices in a Small Semi-Open Economy," Open Economies Review, Springer, vol. 11(2), pages 127-134, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:389. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.