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Product quality adjustments and exchange rates
Project funded by own resources |
Project title |
Product quality adjustments and exchange rates |
Principal Investigator(s) |
Lein, Sarah
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Project Members |
Freitag, Andreas
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Organisation / Research unit |
Departement Wirtschaftswissenschaften / Makroökonomie (Lein) |
Project start |
01.01.2018 |
Probable end |
31.12.2021 |
Status |
Completed |
Abstract |
Firms have various instruments to adjust prices of their products after exchange-rate shocks. While extensive research has been conducted on the aggregate pass-through of exchange-rate changes into prices, we know very little about other means of price adjustment. For this aim, we look at the role of supply-side adjustments, that is products may enter the market, exit the market or the quality of existing products may change. We find a remarkably strong response of quality for export prices after the 2015-appreciation in Switzerland, which accounts for more than one third of the change in export prices one year after the shock. Prices for products produced in Switzerland that are sold in the domestic market adjust quality, too, but to a lesser extent. There is no systematic quality adjustment of import prices after the CHF shock. We furthermore show that firms that experience larger drops in imported intermediate input prices improve quality of their exports by more than firms with small changes in intermediate input prices. Firms that compete with imports in the domestic market also improve quality as a response to lower prices of competitors. Currently, we are using transaction level export data to characterize the product groups that drive these quality adjustments. |
Keywords |
Large exchange-rate shocks, exchange-rate pass-through, supply-side adjustment |
Financed by |
University funds
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Published results () |
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ID |
Autor(en) |
Titel |
ISSN / ISBN |
Erschienen in |
Art der Publikation |
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4683089 |
Freitag, Andreas |
Endogenous Product Adjustment and Exchange Rate Pass-Through |
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Journal of International Economics |
Publication: JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift) |
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25/04/2024
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