Export Prices and Exchange Rates

33 Pages Posted: 23 Apr 2004 Last revised: 3 Jul 2010

See all articles by Irving B. Kravis

Irving B. Kravis

University of Pennsylvania - (Deceased)

Robert E. Lipsey

National Bureau of Economic Research (NBER) at New York (Deceased)

Eliot R.J. Kalter

National Bureau of Economic Research (NBER)

Date Written: July 1977

Abstract

The present paper is intended to make a modest contribution to an under-standing of one small but important link in this complicated chain of interacting factors. It is a link that has often been ignored because strong simplifying assumptions have until very recently usually been made about it. We refer to the relation of exchange rate changes, export prices, and domestic prices. During the last few years a number of attempts have been made to examine the extent to which exchange rate changes were "passed through"; that is, the extent to which a given depreciation in the U.S. dollar, for example, resulted in a corresponding decline in the price of U.S. exports in foreign currencies. However, the possibility that a change in the exchange rate might also alter the relationship between the export price and the domestic price of a given product, expressed in the same currency, has been almost completely ignored. The assumption made, implicitly by most past writers in the theory of international trade and more recently explicitly by advocates of the monetary approach to the balance of payments, has been that the "law of one price" applies to shipments destined for home markets and for foreign markets.

Suggested Citation

Kravis, Irving B. and Lipsey, Robert E. and Kalter, Eliot R.J., Export Prices and Exchange Rates (July 1977). NBER Working Paper No. w0182. Available at SSRN: https://ssrn.com/abstract=260373

Irving B. Kravis

University of Pennsylvania - (Deceased)

N/A

Robert E. Lipsey (Contact Author)

National Bureau of Economic Research (NBER) at New York (Deceased)

Eliot R.J. Kalter

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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