Size matters: asymmetric exchange rate pass-through at the industry level

Patricia Pollard and Cletus C. Coughlin ()

No 2003-029, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Changes in costs faced by firms have direct implications for their price-cost margins. Knowing how prices respond to such cost changes is crucial for understanding how individual markets function and, in turn, for understanding the macroeconomy. We analyze exchange rate pass-through into U.S. import prices for 30 industries to address two questions related to this issue. First, does the direction of a change in the exchange rate affect pass-through? Second, does the size of a change in the exchange rate matter for pass-through? We find that firms in over half the industries studied respond asymmetrically to appreciations and depreciations, but the direction of asymmetry varies. Likewise, most firms respond asymmetrically to large and small changes in the exchange rate with pass-through positively related to the size of the change. When taking into account both direction and size effects we find that the size effect dominates.

Keywords: Foreign; exchange; rates (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: 2004
View list of references View citations in EconPapers

Downloads: (external link)
http://research.stlouisfed.org/wp/2003/2003-029.pdf (application/pdf)

Related works:
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: http://EconPapers.repec.org/RePEc:fip:fedlwp:2003-029

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis
Contact information at EDIRC.
Series data maintained by Diane Rosenberger ().