Byrne, J., Kortava, E. and MacDonald, R. (2013) A new approach to tests of pricing-to-market. Journal of International Money and Finance, 32(1), pp. 654-667. (doi: 10.1016/j.jimonfin.2012.06.001)
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Abstract
This study proposes a new approach to tests of pricing-to-market, which defines the responsiveness of export prices to currency movements. Pricing-to-market parameters may be susceptible to time variation, and we account for this in a novel theoretical and empirical contribution to the literature. We extend the benchmark model of pricing-to-market to account for instability in the relationship between export prices and exchange rates. Moreover, using an empirical methodology robust to parameter instability, we examine the forecasting performance of a pricing-to-market model. In doing so we apply a selection of model mis-specification tests robust to varying degrees of parameter evolution to recent aggregate and disaggregate UK export data. Our estimation results provide strong evidence of pricing-to-market and the instability in the response of export prices to exchange rate fluctuations.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | MacDonald, Professor Ronald and Byrne, Dr Joseph |
Authors: | Byrne, J., Kortava, E., and MacDonald, R. |
College/School: | College of Social Sciences > Adam Smith Business School > Economics |
Journal Name: | Journal of International Money and Finance |
ISSN: | 0261-5606 |
Published Online: | 21 June 2012 |
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