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Market Structure and Exchange Rate Exposure: The Case of Consumable Goods

Andrikopoulos, A. and Dassiou, X. (2016). Market Structure and Exchange Rate Exposure: The Case of Consumable Goods (Report No. 16/12). London, UK: Department of Economics, City, University of London.

Abstract

We examine the impact of exchange rates on profits and prices in differentiated consumable goods markets. We model the exchange rate exposure of exporting firms operating within a Bertrand or a Cournot setting where between and within competition co-exist. We show that market structure and these two forces determine pass through and exposure. Empirical tests of real and bilateral exchange rate exposure using stock price and profit data confirm a link between the ability of a firm to pass on the exchange rate changes to its customers and the magnitude of the exposure on their rivals.

Publication Type: Monograph (Discussion Paper)
Additional Information: Copyright the authors, 2016.
Publisher Keywords: Exchange rate exposure; pass through elasticities; market structure; firm behavior; Between Countries Competition; Within Countries Competition
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Departments: School of Arts & Social Sciences > Economics > Discussion Paper Series
URI: http://openaccess.city.ac.uk/id/eprint/16512
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