The exchange rate pass-through to import and export prices : the role of nominal rigidities and currency choice / Ehsan U. Choudhri and Dalia S. Hakura.
Material type:
TextSeries: IMF working paper ; WP/12/226.Publication details: Washington, D.C. : International Monetary Fund, Institute for Capacity Development, 2012.Description: 1 online resource (34 pages)Content type: - text
- computer
- online resource
- 9781475589801
- 1475589808
- Foreign exchange rates -- Econometric models
- Imports -- Econometric models
- Exports -- Econometric models
- Taux de change -- Modèles économétriques
- Importations -- Modèles économétriques
- Exportations -- Modèles économétriques
- BUSINESS & ECONOMICS -- Finance
- Exports -- Econometric models
- Foreign exchange rates -- Econometric models
- Imports -- Econometric models
- 332.4/5 23
- HG3821 .C46 2012eb
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"September 2012."
"Using both regression- and VAR-based estimates, the paper finds that the exchange rate pass-through to import prices for a large number of countries is incomplete and larger than the pass-through to export prices. Previous studies have reported similar results, which give rise to the puzzle that while local currency pricing is needed to account for incomplete import price pass-through, it would not imply a lower export price passthrough. Recent explanations of this puzzle have emphasized markup adjustment in response to exchange rate changes. This paper suggests an alternative explanation based on the presence of both producer and local currency pricing. Using a dynamic general equilibrium model, the paper shows that a mix of producer and local currency pricing can explain the pass-through evidence even with a constant markup. The model can also explain the observed exchange rate and inflation variability as well as the fact that the regression and VAR estimates tend to be similar."--Abstract.
Includes bibliographical references.
Cover; Contents; I. Introduction; II. Empirical Evidence; III. The Model; A. Basic Setup; B. Key Relations; IV. Quantitative Analysis; A. Key Determinants of the Pass-Through to Trade Prices; B. Currency of Invoicing and the Pass-Through; V. Concluding Remarks; References; Tables; 1. OLS Regressions: Impact of Exchange Rate Changes on Trade Prices, 1979-2010; 2. VAR: First Quarter Trade Price Response to a One Percent Change in the Exchange Rate, 1979-2010; 3. Pass-Through Elasticities for Different Shocks.
4. Wage-Price Stickiness, Exchange Rate Persistence, Inflation Reaction and the Pass-Through5. Stochastic Simulations; 6. Invoicing Currency Shares and the Pass-Through; Figures; 1. Regression and VAR Estimates of the Pass-Through; 2. Impulse Response Functions; 3. PCP Shares and the Pass-Through; Appendix Tables; 1. VAR: First Quarter Trade Price Response to a One Percent Change in the Exchange Rate 1985-1997; 2. VAR: First Quarter Trade Price Response to a One Percent Change in the Exchange Rate 1998-2010.
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