Question: 4) Exchange rate pass-through (ERPT) can be defined as the transmission of exchange rate movements on prices (import, export and domestic prices). There are some

4) Exchange rate pass-through (ERPT) can be defined as the transmission of exchange rate movements on prices (import, export and domestic prices). There are some micro and macroeconomic factors that might affect the degree of ERPT such as i) pricing to market (price discrimination ability of multinational firms), ii) local currency pricing (invoicing), iii) inflation environment (Taylors hypothesis). Briefly explain how each of these conditions might affect the ERPT.

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