This chapter estimates the extent of Pricing to Market (PTM) for Japanese
automobiles exported to the US market over the 1987-2000 period. The price data used
is the annual, model-specific, manufacturer’s suggested retail price (MSRP) of identical
cars (17 models in total), all made in Japan, but sold in both the US and Japan. These
prices ratios (of foreign over domestic) are regressed on the real exchange rate, real
wages and US and Japanese real GNI as in the seminal work of Marston (1990) which
originally used industry level price data. As with Marston, I find a high degree of PTM
behavior, indeed over 100% PTM, somewhat higher than Marston (1990). Moreover, it
appears that this PTM behavior has fallen somewhat over time. This implies increasing
exchange rate pass-through, contrary to Taylor’s (2000) conjecture.
Keywords: Exchange-rate pass-through, Honda, Japanese autos, Japanese
exports, Mazda, pricing-to-market, Nissan, retail data, Toyota, US market.
