Economics, Econometrics and Finance
4 years ago

Exchange rate volatility limits impact on export prices and quantities.

International Monetary Fund eBooks
Exchange Rate Volatility, Pricing to Market and Trade Smoothing
Hamid Faruqee, Peter Clark

Paper Summary

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Exchange rate volatility affects export prices and quantities differently due to firms adjusting prices to stabilize destination prices. This limits the impact of exchange rate changes on prices and quantities. Research using data from G-7 countries and U.S. industries shows that exchange rate fluctuations do not fully translate into changes in prices and quantities, with varying degrees of pass-through observed.