Importers, exporters, and exchange rate disconnect
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Date
2012-12
Authors
Amiti, Mary
Itskhoki, Oleg
Konings, Jozef
Journal Title
Journal ISSN
Volume Title
Publisher
National bureau of economic research
Abstract
Large exporters are simultaneously large importers. In this paper, we show that this pattern is key
to understanding low aggregate exchange rate pass-through as well as the variation in pass-through
across exporters. First, we develop a theoretical framework that combines variable markups due to
strategic complementarities and endogenous choice to import intermediate inputs. The model predicts
that firms with high import shares and high market shares have low exchange rate pass-through. Second,
we test and quantify the theoretical mechanisms using Belgian firm-product-level data with information
on exports by destination and imports by source country. We confirm that import intensity and market
share are the prime determinants of pass-through in the cross-section of firms. A small exporter with
no imported inputs has a nearly complete pass-through, while a firm at the 95th percentile of both
import intensity and market share distributions has a pass-through of just above 50%, with the marginal
cost and markup channels playing roughly equal roles. The largest exporters are simultaneously highmarket-
share and high-import-intensity firms, which helps explain the low aggregate pass-through
and exchange rate disconnect observed in the data.
Description
Keywords
importers, exporters, Research Subject Categories::SOCIAL SCIENCES::Business and economics
Citation
Amiti Mary, Itskhoki Oleg, Konings Jozef, 2012, National bureau of economic research; Importers, exporters, and exchange rate disconnect. http://nur.nu.edu.kz/handle/123456789/1891