| This paper analyzes three topics with regard to the exchange rate pass-through. First, VER on Japanese passenger car exports to the U.S. did not affect the exchange rate pass-through in the periods of January 1989 to March 1994 because VER was not binding since 1987 and because there was no structural change in the exchange rate pass-through due to elimination of VER since April 1994.; Second, in the analysis of exchange rate pass-through in the passenger car sector, I use the same product classification of SITC 5 digit and HTS 6 digit for the first time. I find that there is aggregation bias in using SITC 5 digit classification, and German and Swedish medium-size cars that are more differentiated have a higher degree of exchange rate pass-through but Japanese cars have no exchange rate pass-through at all. I find only one case of asymmetry in exchange rate pass-through during the periods of depreciation of the mark and yen, respectively. In the long-run, exporters consider other competitors' export price and price of cars produced in U.S. as well as production cost exchange rate in setting export price because even though there is no cointegration among export price, cost, and exchange rate there is cointegration if we consider other competitors' export price and price of cars produced in the U.S.; During the crisis, even though the export price fell, the export volume and market share did not increase, but after the crisis when the exchange rate became stable, the export volume and market share increased. This shows the importance of stability of exchange rate as well as exchange rate level in exports. |
