Is export price adjustment asymmetric?: evaluating the market share and marketing bottlenecks hypotheses

Abstract

Export price adjustment is asymmetric with respect to currency fluctuations in at least two circumstances. If firms face capacity constraints in distribution networks or quantitative trade restrictions, then pricing-to-market may be greater during depreciations of the exporter's currency. If firms attempt to build market share subject to the threat of trade restrictions, then pricing-to-market may be greater during appreciations of the exporter's currency. This paper tests for asymmetries using panel data on German and Japanese 7-digit industry exports. The data seldom reject the hypothesis of a symmetric response of prices to exchange rates.