Exchange Rate Passthrough to Export Prices: Assessing Cross-Country Evidence

Robert John Vigfusson (), Nathan Sheets and Joseph E. Gagnon

Review of International Economics, 2009, vol. 17, issue 1, pages 17-33

Abstract: A growing empirical literature reports evidence of a decline in exchange rate passthrough to import prices in a number of industrial countries. Our paper complements this literature by examining passthrough from the other side of the transaction; that is, we assess the exchange rate sensitivity of export prices (denominated in the exporter's currency). We find that the prices charged on exports to the United States are more responsive to the exchange rate than are export prices to other destinations, which is consistent with results in the literature that import price passthrough in the US market is relatively low. In addition, the exchange rate sensitivity of export prices over time has been significantly affected by country- and region-specific factors, including the Asian financial crisis (for emerging Asia), deepening integration with the United States (for Canada), and the effects of the 1992 ERM crisis (for the United Kingdom). Copyright © 2009 The Authors. Journal compilation © Blackwell Publishing Ltd 2009.

Date: 2009

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