Currency Choice and Exchange Rate Pass-through

Gita Gopinath, Oleg Itskhoki and Roberto Rigobon

Scholarly Articles from Harvard University Department of Economics

Abstract: In the open economy macro literature with nominal rigidities, the currency in which goods are priced has important implications for optimal monetary and exchange rate policy and for exchange rate pass-through. We show, using novel data on currency and prices for U.S. imports, that even conditional on a price change, there is a large difference in the pass-through of the average good priced in dollars (25%) versus non-dollars (95%). We document this to be the case across countries and within disaggregated sectors. This finding contradicts the assumption in an important class of models that the currency of pricing is exogenous. We present a model of endogenous currency choice in a dynamic price setting environment and show that the predictions of the model are strongly supported by the data.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (378)

Published in American Economic Review

Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/30703874/cp15f.pdf (application/pdf)

Related works:
Journal Article: Currency Choice and Exchange Rate Pass-Through (2010)
Working Paper: Currency Choice and Exchange Rate Pass-through (2007)
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:hrv:faseco:30703874

Access Statistics for this paper

More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().