Prices more responsive in longer buyer-seller relationships – NY Fed paper

New York skyscrapers and flag

Prices are more responsive to exchange rate shocks when firms have longer trading relationships with one another, a paper published by the Federal Reserve Bank of New York finds.

Sebastian Heise examines how the longevity of relationships between firms affects the pass-through of prices with exchange rate shocks. He uses US importer and foreign exporter data from the last 20 years, amounting to 130 million transactions.

Heise finds price movements in a new relationship reflect an average of 12

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