Wholesale price rigidities and exchange rate pass-through: Evidence from daily data of agricultural products

Héctor M. Núñez, Jesus Otero and Andres Trujillo-Barrera

International Economics, 2023, vol. 176, issue C

Abstract: We provide insights into the extent of rigidities and the exchange rate pass-through (ERPT) of wholesale food prices at the regional level in a small open emerging economy. Notably, we utilize a novel and extensive micro-database of wholesale prices in markets within the principal and intermediate Colombian cities. The granularity of the data provides the advantage of assessing whether temporal and spatial aggregation procedures conceal transmission channels from the exchange rate to wholesale agricultural prices. Our initial exploratory analysis of wholesale pricing characteristics suggests that the Colombian food sector demonstrates moderate price rigidity, with fewer price asymmetries in response to positive and negative exchange rate fluctuations. Furthermore, cross-section results indicate a lifelong ERPT of 27% in our preferred model specification. Moreover, outcomes from a non-linear autoregressive distributed lag (NARDL) analysis show cointegration between the exchange rate and wholesale prices in 81% of the cases, complete exchange rate pass-through (with notable heterogeneity across products), and less prevalence of price asymmetries.

Keywords: Wholesale prices; Exchange rate pass-through; Nominal rigidity; Asymmetry; Heterogeneity (search for similar items in EconPapers)
JEL-codes: E31 F31 Q11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:176:y:2023:i:c:s2110701723000574

DOI: 10.1016/j.inteco.2023.08.005

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