SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

Abstract: The Swedish export price determination for automobiles and kraft paper to three destination countries, over the period 1980-1994, is investigated. Formal tests on an error correction model indicate results consistent with price discrimination in Swedish exports of both goods. The exporters use their market power for pricing to market, which is characterized by the concern for foreign conditions, and implies an incomplete exchange rate pass-through. However, the pricing behaviour does not seem to be determined by the development of market shares, in any cases except one. The total pass-through to the local currency price within a year, that is the effect of an exchange rate change working through all variables and all interactions in the price determination, span between -16 % and +109 %.

Keywords: Cointegration; exchange rates; export prices; market shares; pass-through; pricing to market

JEL-codes: E30; F31; F41

51 pages, February 26, 1999

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