Using a heterogeneous firm model with firm entry and endogenous markups, I study how the financial constraints of exporting firms affect exchange rate pass-through behaviors. I find that the financial constraints increase the degree of exchange rate pass-through.

The purpose of this paper is to examine what forms of monetary and financial cooperation will be desirable in East Asia with a focus on the spillover effects of currency misalignment on the Japanese economy in particular, thereby obtaining implications for monetary and financial cooperation in...