Exchange rate pass-through and dynamic oligopoly: an empirical investigation

This paper explicitly takes into account the dynamic oligopolistic rivalry among source producers to evaluate the degree of exchange-rate pass-through . Using recent time-series techniques for the case of imported automobiles in Switzerland, the results show that prices are strategic complements and that the degree of pass-through is lower in the long run than in the short run. This is due to the fact that, although some rivals match long-term pri ce changes, others do not, inducing the producer who faces a change in exch ange rate to absorb a greater proportion of the variation. The degrees of p ass-through are also low with respect to other studies which do not endogen ize pricing behavior. (C) 2000 Elsevier Science B.V. All rights reserved.