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This study is to test the related party trade on the degree of exchange rate pass-through.  Due to the operational flexibility companies are able to avoid the expected currency conversion loss by reducing trade volume while benefiting from the expected currency conversion gain by increasing the trade volume.  One way to achieve that is to go through the related party trade which is the international trade between two parties where either party owns, directly or indirectly, 10 percent or more of the other party.  With the presence of the related party trade, thus operational flexibility, in the international trade, the degree of exchange rate pass-through has been reduced, meaning that the currency risk on pricing is somehow hedged.

Exchange Rate Pass-through; Strategic Trade