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Arm's-Length Transactions as a Source of Incomplete Cross-Border Transmission: the Case of Autos AgEcon
Hellerstein, Rebecca; Villas-Boas, Sofia Berto.
A growing share of international trade occurs through intra-firm transactions, transactions between domestic and foreign subsidiaries of a multinational firm. The difficulties associated with writing and enforcing a vertical contract compound when a product must cross a national border, and may explain the high rate of multinational trade across such borders. We show that this common crossborder organization of the firm may have implications for the well-documented incomplete transmission of shocks across such borders. We present new evidence of a positive relationship between an industry's share of multinational trade and its rate of exchange-rate pass-through to prices. We then develop a structural econometric model with both manufacturers and retailers...
Tipo: Working or Discussion Paper Palavras-chave: Cross-border transmission: Multinationals; Arm's-length transactions; Real exchange rates; Exchange-rate pass-through; Vertical contracts; Autos; International Relations/Trade; F14; F3; F4.
Ano: 2006 URL: http://purl.umn.edu/7196
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