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Abstract
A declining trend in the prices of vanilla beans reduce export earnings of developing country exporters. At the same time,
currencies for these developing countries have depreciated. The 'new' trade theories suggest that market structure plays
an important role in relating exchange rate devaluations to price declines. This paper investigates the market structure and
estimates the impact of exchange rate movements on prices for vanilla beans imported by the USA from five producers of
vanilla beans in developing countries. Unlike other studies, the estimation is based on a 'fixed-effects' econometric model
derived from the importer's profit equation and the 'Pricing to Market' (PTM) hypothesis. Data are a pooled cross-section
and time series covering the period 1967-1997. The results reveal some evidence that US importers of vanilla beans have
the market power to apply price discrimination and to adjust import prices in reaction to exchange rate movement vis-a-vis
exporters.© 2001 Elsevier Science B.V. All rights reserved.