Exchange Rate Pass-Through into Import Prices

Jose Manuel Campa and Linda S. Goldberg ()

No 4391, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We provide cross-country and time series evidence on the extent of exchange rate pass-through into the import prices of 25 OECD countries. Across the OECD and especially within manufacturing industries, we find compelling evidence of partial pass-through in the short run, rejecting both producer-currency pricing and local currency pricing. Over the long run, producer-currency pricing is more prevalent for many types of imported goods. We show that many countries have experienced changes in exchange rate pass-through over the past decades. While we find that countries with higher rates of exchange rate volatility are also those with higher pass-through elasticities, we also conclude that macroeconomic variables have played only a minor role in accounting for the evolution of OECD pass-through over time. Far more important for pass-through changes have been the dramatic shifts in the composition of country import bundles.

Keywords: exchange rates; pass-through; trade composition (search for similar items in EconPapers)
JEL-codes: F30 F40 (search for similar items in EconPapers)
Date: 2004-05
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Journal Article: Exchange Rate Pass-Through into Import Prices (2005)
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