Pricing in International Markets: Lessons from the Economist

IB-94-ll

Posted: 22 Aug 1998

See all articles by Atish R. Ghosh

Atish R. Ghosh

International Monetary Fund (IMF) - Policy Development and Review Department

Holger C. Wolf

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS)

Multiple version iconThere are 2 versions of this paper

Abstract

Export firms are often assumed to stabilize destination market prices in the face of nominal exchange rate changes in order to protect market share. We show that standard tests of such pricing to market fail to discriminate against the alternative hypothesis of menu costs. As a case study, we examine the characteristics and determinants of changes in the cover prices of The Economist magazine in a sample of twelve countries over the floating rate period. We find that, while the law of one price fails, there is no evidence of systematic attempts to offset nominal exchange rate movements. Instead, the findings are consistent with menu cost driven pricing behavior.

JEL Classification: D49

Suggested Citation

Ghosh, Atish R. and Wolf, Holger C., Pricing in International Markets: Lessons from the Economist. IB-94-ll. Available at SSRN: https://ssrn.com/abstract=6868

Atish R. Ghosh

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

Holger C. Wolf (Contact Author)

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS) ( email )

Washington, DC 20057
United States
202-687-8079 (Phone)
202-687-8359 (Fax)

HOME PAGE: http://georgetown.edu/faculty/wolfhc/

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