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Title: |
Partial Small Country Import Pass-Through,
Currency Composition, and Imported Inputs |
| Author: |
Webber, Anthony
G. |
| Author
Affiliation: |
U Wollongong |
| Source: |
International Economic Journal, Winter 1995, v. 9, no. 4, pp. 13-30 |
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Publication Date: |
Winter 1995 |
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Abstract: |
Long run import pass-through is
investigated in a partial equilibrium model in the context of a small
domestic economy. Contrary to the standard view, it is shown that long
run small country pass-through may be incomplete provided three
sufficient conditions are met: (1) the foreign producer uses imported
inputs, (2) those inputs are paid for in a neutral currency, and (3)
three-way arbitrage is in operation. The theoretical predictions of the
partial equilibrium model are tested against the results of recent small
country empirical studies. The sensitivity of pass through to
productivity changes, monopsonistic behavior, imperfect competition, the
timeframe of the firm, and tariff protection are also examined. |
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