MURPHYS-HSFS-2014 - 7th International Workshop on Multi-Rate Processes & Hysteresis, 2nd International Workshop on Hysteresis and Slow-Fast Systems, April 7-11, 2014 - Abstract

Werner, Laura

Hysteresis and asymmetry: two perspectives on pricing-to-market nonlinearity

Pricing decisions of the exporters, who are facing a non-constant elasticity of demand with respect to prices in local currencies in their destination markets, might depend on the exchange rate changes. Although empirical literature often assumes that the impact of the exchange rate on the exporters' prices is linear and the markup adjustment does not depend on the magnitude or direction of the exchange rate, we question this statement and test for hysteresis and asymmetry of pricing-to-market. On example of the beer market, we show that both types of nonlinearities play an important role in PTM decisions.