The Impact of Exchange Rate on US Imports of Salmon: A Two-Stage Demand Model Approach

This study investigates the impact of the exchange rate on trade flows by using a two-stage demand model. The elasticity of exchange rate pass-through (ERPT) derived from the model is determined by demand elasticity, excess supply elasticity, elasticity of substitution, and market share. The empirical case is the US salmon import market. For the primary export countries, the elasticity of ERPT ranges between 0.37 and 0.62 in the long run. Although the empirical results suggest a partial ERPT in this market, there is no evidence of an asymmetric ERPT, as revealed by the simulated ERPT elasticities.