Quality, trade, and exchange rate pass-through

Natalie Chen and Luciana Juvenal

Journal of International Economics, 2016, vol. 100, issue C, 61-80

Abstract: We investigate theoretically and empirically the effects of real exchange rate changes on the behavior of firms exporting multiple products with heterogeneous levels of quality. Our model, which features a demand elasticity that falls with quality, predicts more pricing-to-market and a smaller response of export volumes to a real depreciation for higher quality goods. We provide strong support for the model predictions using a unique data set of Argentinean firm-level wine export values and volumes between 2002 and 2009 combined with experts wine ratings to measure quality. The heterogeneity we find in the response of export prices and volumes to changes in exchange rates remains robust to alternative measures of quality, samples, and specifications.

Keywords: Distribution costs; Exchange rate pass-through; Heterogeneity; Pricing-to-market; Quality; Wine (search for similar items in EconPapers)
JEL-codes: F12 F14 F31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (113)

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Related works:
Working Paper: Quality, Trade, and Exchange Rate Pass-Through (2014)
Working Paper: Quality, Trade, and Exchange Rate Pass-Through (2013)
Working Paper: Quality, Trade, and Exchange Rate Pass-Through (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:100:y:2016:i:c:p:61-80

DOI: 10.1016/j.jinteco.2016.02.003

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