Endogenous Product Adjustment and Exchange Rate Pass-Through

Andreas Freitag, Sarah M. Lein and Sarah Marit Lein
Authors registered in the RePEc Author Service: Sarah Marit Lein

No 10117, CESifo Working Paper Series from CESifo

Abstract: We document how product quality responds to exchange rate movements and quantify the extent to which these quality changes affect the aggregate pass-through into export prices. We analyze the substantial sudden appreciation of the Swiss franc post removal of the 1.20-CHF-per-euro lower bound in 2015 using export data representing a large share of the universe of goods exports from Switzerland. We find that firms upgrade the quality of their products after the appreciation. Furthermore, they disproportionately remove lower-quality products from their product ranges. This quality upgrading and quality sorting effect accounts for a substantial share of the total pass-through one year after the appreciation. We cross-check our results with the microdata underlying the Swiss export price index, which includes an adjustment factor for quality based on firms’ reported product replacements, and obtain similar results.

Keywords: large exchange rate shocks; exchange rate pass-through; quality adjustment (search for similar items in EconPapers)
JEL-codes: E30 E31 E50 F14 F41 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eec, nep-int, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp10117.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Unavailable

Related works:
Journal Article: Endogenous product adjustment and exchange rate pass-through (2023)
Working Paper: Endogenous Product Adjustment and Exchange Rate Pass-Through (2022)
Working Paper: Endogenous Product Adjustment and Exchange Rate Pass-Through (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10117

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe (wohlrabe@ifo.de).