Markup Adjustment and Exchange Rate Fluctuations: Evidence From Panel Data on Automobile Exports

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This paper uses bilateral automobile export unit values from the United States, Germany and Japan to measure the importance of markup adjustment that is associated with exchange rate changes across export destination markets. Japanese auto export prices exhibit a high degree of markup adjustment that has the effect of stabilizing prices in units of the buyer's currency. There is weak evidence of this behavior in German auto exports and none for U.S. auto exports. Where it exists, markup adjustment is very persistent, not merely a short run phenomenon. The dynamic pattern of adjustment is consistent with invoicing in the exporter's currency, except for exports to the United States and Canada.

Published: Journal of International Money and Finance, April 1995, pp. 289-310

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