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Non-Price Competition and Exchange Rate Pass-Through
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1725-6704
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EUI ECO; 2007/54
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ASCIONE, Aurora, Non-Price Competition and Exchange Rate Pass-Through, EUI ECO, 2007/54 - https://hdl.handle.net/1814/7661
Abstract
A substantial body of empirical works document that exchange rate pass-through to con- sumer prices is incomplete. This evidence has cast doubts on the ability of flexible exchange rates to generate expenditure switching. In a dynamic stochastic discrete-time duopoly game, non-price competition among firms endogenously originates a degree of exchange rate pass-through close to zero together with an expenditure switching effect stronger than in the standard models.