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Missing Import Price Changes and Low Exchange Rate Pass-Through

Etienne Gagnon (), Benjamin Mandel () and Robert Vigfusson ()

American Economic Journal: Macroeconomics, 2014, vol. 6, issue 2, 156-206

Abstract: A large body of empirical work has found that exchange rate movements have only modest effects on U.S. inflation. However, exchange rate pass-through may be underestimated because some price changes are missed when constructing price indexes. We investigate downward biases that arise when items exit or enter the U.S. import price index. Using Bureau of Labor Statistics microdata we find that, although potentially large in theory, the empirical biases are modest over typical forecast horizons. As such, the empirical evidence continues to support the conclusion that pass-through to U.S. import prices is low.

JEL-codes: C43 E31 E52 F31 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/mac.6.2.156
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Handle: RePEc:aea:aejmac:v:6:y:2014:i:2:p:156-206