English, Article, Journal or magazine article edition: Industry Restructuring, Mark-ups, and Exchange Rate Pass-Through Beverly Lapham; Danny Leung

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Industry Restructuring, Mark-ups, and Exchange Rate Pass-Through
Author
  • Beverly Lapham
  • Danny Leung
Physical Description
  • preprint
Notes
  • Consumer prices are not very responsive to movements in nominal exchange rates and their response has fallen in Canada since the mid 1980s. This paper explores two of the most likely explanations for this decline in exchange rate pass-through to consumer prices: (1) lower inflation and (2) restructuring in the retail sector. We believe that both explanations are important but our primary focus in this paper is on the second explanation. We discuss the restructuring that has occurred in Canadian retail and trends in mark-ups and concentration in that sector. We argue that to understand these trends, it is important to examine pass-through in industrial organization models with strategic elements. Finally, we present a series of such models and evaluate the effects of various forms of restructuring on mark-ups, concentration, and exchange rate pass-through.
  • Pass-Through, Restructuring, Strategic Pricing, Mark-ups, Exchange Rates, Imperfect Competition
  • RePEc:qed:wpaper:1120
  • Consumer prices are not very responsive to movements in nominal exchange rates and their response has fallen considerably in Canada since the mid 1980s. This paper explores two of the most likely explanations for this decline in exchange rate pass-through to consumer prices: (1) lower inflation and (2) restructuring in the retail sector. We believe that both explanations are important but our focus in this paper is the latter explanation. We first present estimates which suggest that mark-ups in the retail sector in Canada have decreased while concentration has increased over this time period. We also discuss other trends in Canadian retailing which suggest considerable restructuring in this sector which have led to changes in the nature of competition. Based on this evidence, we argue that it is important to examine pass-through in industrial organization models with strategic elements. We present such a model which generates lower mark-ups, higher concentration, and lower exchange rate pass-through simultaneously.
  • Exchange Rate Pass-Through, Strategic Pricing
  • RePEc:red:sed006:707
Language
  • English
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