LOW EXCHANGE RATE PASS - THROUGH IN THE UNITED STATES, ECONOMY - WIDE AND IN AGRICULTURE

W. Zeng () and W. Johnson ()

International Trade and Trade Policy, 2023, vol. 9, issue 2

Abstract: Â Â We provide evidence of low pass-through of exchange rates into domestic prices in the United States, both within agriculture and economy-wide, from 1970 to 2022. Exchange rate pass-through is defined as the extent to which a change in exchange rates translates into a change in domestic prices. We revisit the question of exchange rate pass-through into domestic producer and consumer prices. With food inflation being one of the major areas of concern, and with trade playing a disproportionately important role in U.S. agriculture , we also investigate exchange rate pass-through for agricultural prices as well as for prices in the general economy. Our estimation strategy does not use cross-sectional variation, but instead exploits variation over time in exchange rate indices and price indices. Most of our estimates of pass-through are not significantly different from zero, and we are almost uniformly able to reject the hypothesis of complete pass-through. Our findings suggest that any further increases in the value of the U.S. dollar will have little effect on inflation rates in the United States, in agriculture or economy-wide.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:acl:journl:y:2023:id:597

DOI: 10.21686/2410-7395-2023-2-22-37

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