NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Exchange Rate Pass-through and Industry Characteristics: The Case of Taiwan's Exports of Midstream Petrochemical Products

Kuo-Liang Wang, Chung-Shu Wu

NBER Working Paper No. 5749
Issued in September 1996

Based on 1986-1992 survey data of 22 midstream petrochemical industries in Taiwan, the empirical results of the export price, the markup ratio and the price-cost margin equations in this study show that Taiwan's petrochemical firms absorb only a small portion of a given weighted exchange rate change in their export prices, markup ratios and price-cost margins. It implies that Taiwan's petrochemical firms have a weak pricing-to-market pattern. The empirical results may be explained by the volatility of profitability, high market concentration and small export/domestic production share. However, the impacts of the exchange rate change on the export price, markup ratio and price-cost margin have a tendency to increase during the period of 1987" to 1992. The tendency might be attributed to increasing competition of the petrochemical markets in the world, or Taiwanese firms' gradual realization of the importance of holding their world market shares in response to the exchange rate change.

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Document Object Identifier (DOI): 10.3386/w5749

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