Firms ’ Heterogeneity and Incomplete Pass-Through

  title={Firms ’ Heterogeneity and Incomplete Pass-Through},
  author={Stefania Garetto},
A large body of empirical work documents that prices of traded goods change by a smaller proportion than real exchange rates between the trading countries (incomplete pass-through). The wedge between exchange rates and relative prices also varies across countries (pricing-tomarket). I present a model of trade and international price-setting with heterogeneous firms, where firms’ strategic behavior implies that: 1) firm-level pass-through is incomplete and a U-shaped function of firm market… CONTINUE READING

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