Stickiness, Synchronization, and Exchange Rate Passthrough in Intrafirm Trade Prices
55 Pages Posted: 23 Sep 2009 Last revised: 19 Dec 2009
Date Written: September 1, 2009
About forty percent of all U.S. international trades occurs between related parties, or intrafirm, such as trades between a parent and subsidiary of the same multinational corporation. Using a good-level dataset that distinguishes arm’s length from intrafirm trades, I demonstrate that for the set of differentiated products, intrafim prices are characterized by 1) less stickiness, 2) less synchronization, and 3) greater exchange rate passthrough. These differences emerge in a simulated dynamic model in which input exporters that are integrated, unlike arm’s length exporters, seek to maximize combined manufacturer and distributor profits.
Keywords: intrafirm trade, exchange rate passthrough, price rigidity
JEL Classification: F4, E3
Suggested Citation: Suggested Citation