Chen, Natalie and Juvenal, Luciana (2014) Quality, trade, and exchange rate pass-through. Working Paper. IMF (International Monetary Fund). IMF Working Paper (Number 14/42).

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Abstract

This paper investigates theoretically and empirically the heterogeneous response of exporters
to real exchange rate fluctuations due to product quality. Our model shows that the elasticity
of demand perceived by exporters decreases with a real depreciation and with quality,
leading to more pricing-to-market and to a smaller response of export volumes to a real
depreciation for higher quality goods. We test the proposed theory using a highly
disaggregated Argentinean firm-level wine export dataset between 2002 and 2009 combined
with experts wine rankings as a measure of quality. The model predictions find strong
support in the data and the results are robust to different measures of quality, samples,
specifications, and to the potential endogeneity of quality.

Item Type:	Working or Discussion Paper (Working Paper)
Divisions:	Faculty of Social Sciences > Economics
Series Name:	IMF Working Paper
Publisher:	IMF (International Monetary Fund)
Official Date:	March 2014
Dates:	Date Event March 2014 Published
Number:	Number 14/42
Number of Pages:	57
Institution:	University of Warwick
Status:	Peer Reviewed
Publication Status:	Published

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