Exchange Rate Pass-Through and the Role of International Distribution Channels

Posted: 23 Feb 2015

See all articles by Ramarao Desiraju

Ramarao Desiraju

University of Central Florida - College of Business Administration

Milind M. Shrikhande

Georgia State University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: December 1996

Abstract

Manufacturers selling in foreign markets often do not completely pass on the effects of fluctuations in exchange rates to the prices of their products. Our paper addresses this puzzle and studies the effects of the international distribution channel on exchange rate pass-through. We develop an exchange rate pass-through model that takes into account the role of an intermediary between a domestic manufacturer and its consumers in a foreign market. We find that the magnitude of the pass-through depends on the presence of an incentive problem in the distribution channel. When there is no incentive problem, pass-through is complete; however, when there is an incentive problem, pass-through depends on various characteristics of the intermediary and the market setting. Our analysis underscores the importance of considering the role of international distribution channels and suggests directions for further work on exchange rate pass-through.

JEL Classification: F23, D30, D82

Suggested Citation

Desiraju, Ramarao and Shrikhande, Milind M., Exchange Rate Pass-Through and the Role of International Distribution Channels (December 1996). FRB Atlanta Working Paper No. 96-22, Available at SSRN: https://ssrn.com/abstract=2561927

Ramarao Desiraju

University of Central Florida - College of Business Administration ( email )

Department of Marketing
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Milind M. Shrikhande (Contact Author)

Georgia State University - Department of Finance ( email )

1221 J. Mack Robinson College of Business
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Atlanta, GA 30303-3083
United States
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