Exchange rates, retailers, and importing : theory and firm-level evidence / by Patrick Alexander and Alex Chernoff. : FB3-5/2019-34E-PDF

"We develop a model with firm heterogeneity in importing and cross-border shopping among consumers. Exchange-rate appreciations lower the cost of imported goods, but also lead to more cross-border shopping; hence, the net impact on aggregate retail prices and sales is ambiguous. Using Canadian firm-level data from 2002 to 2012, we find empirical support for several predictions of the model. We then estimate the model-implied exchange-rate elasticities of aggregate retail prices and sales. Our benchmark results indicate a deflationary effect of appreciations on retail prices and a small positive effect on sales. From 2002 to 2012, the Canadian exchange rate appreciated by 57%, which, according to our model, led to a 6.5% reduction in the retail price index. We also find that the estimated elasticities of aggregate retail prices and sales grew over this period, driven by import growth from China. This suggests that the transmission of exchange-rate movements to prices has grown since the early 2000s, which has consequences for the role of Canada's flexible exchange rate regime in supporting inflation stability"--Abstract, page ii.

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Renseignements sur la publication
Ministère/Organisme Bank of Canada.
Titre Exchange rates, retailers, and importing : theory and firm-level evidence / by Patrick Alexander and Alex Chernoff.
Titre de la série Bank of Canada staff working paper, 1701-9397 ; 2019-34
Type de publication Série - Voir l'enregistrement principal
Langue [Anglais]
Format Électronique
Document électronique
Note(s) "September 2019."
Includes bibliographical references (pages 38-42).
Includes abstracts in English and French.
Information sur la publication Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2019.
Auteur / Contributeur Alexander, Patrick D., author.
Chernoff, Alex W., author.
Description 1 online resource (ii, 47 pages) : illustrations (some colour).
Numéro de catalogue
  • FB3-5/2019-34E-PDF
Descripteurs Exchange rates
Retail trade
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