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Pricing to pass‐through under volatile exchange rate scenario in the US manufacturing

Tantatape Brahmasrene (Purdue University North Central, USA)
Jui‐Chi Huang (Pennsylvania State University, USA)

World Journal of Entrepreneurship, Management and Sustainable Development

ISSN: 2042-5961

Article publication date: 31 December 2010

190

Abstract

A plethora of studies suggests the pricing decisions depend on product substitutability, costs, market structures, and the magnitude of exchange rate uncertainty in the international setting. Taking a departure from existing literature, this paper examines the average degree of exchange rate pass‐through to the prices of export product under low to high exchange rate volatility. A panel data estimation method is performed using the annual US export data to 69 export destinations across 111 four‐digit Standard Industrial Classification (SIC) industries. An average zero or insignificant pass‐through estimate for all industries in the high exchange‐rate‐fluctuation sub‐sample confirms the hypothesis. In this period of high exchange risk, the possible high hedging engagements disconnect the relationship between exchange rate movements and export pricing.

Keywords

Citation

Brahmasrene, T. and Huang, J. (2010), "Pricing to pass‐through under volatile exchange rate scenario in the US manufacturing", World Journal of Entrepreneurship, Management and Sustainable Development, Vol. 6 No. 1/2, pp. 53-60. https://doi.org/10.1108/20425961201000005

Publisher

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Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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