EXCHANGE RATE PASSTHROUGH UNDER FIRMS' CAPACITY COMMITMENT: THEORETICAL AND EMPIRICAL ANALYSES,Used

EXCHANGE RATE PASSTHROUGH UNDER FIRMS' CAPACITY COMMITMENT: THEORETICAL AND EMPIRICAL ANALYSES,Used

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This research develops an exchange rate pass through model, that centers on the firms' commitment in capacity to 'price to market' (PTM) and firms' strategic moves in the form of a twostage game. An econometric evaluation of the exchange rate passthrough model is also conducted to explain PTM empirically by applying the factors outlined by our model. The present research attempts the following: (i) the development of a simple twoperiod model of exchange rate passthrough under uncertainty in the absence of firms' capacity commitment, and (ii) the development of a simple twoperiod model of exchange rate passthrough under uncertainly in the presence of firms' capacity commitment on the basis of recent developments in industrial organization theory: Dixit (1980), Eaton and Ware (1987) and Jean Tirole (1991) and (iii) the formulation of the error correction models of the export prices of five export industries in Malaysia. The related areas include localcurrency pricing of exports, currency denomination of exports and exchange rate passthrough.

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