Production sharing and exchange rate pass-through

Kyungmin Kim

International Review of Economics & Finance, 2021, vol. 76, issue C, 817-835

Abstract: This paper proposes a theoretical background for various possibilities of exchange pass-through and expenditure-switching by introducing an intermediate input sector into Rodriguez-Lopez (2011) model. I show that the degrees of exchange rate pass-through and expenditure switching depend on the shares of imported inputs in total costs. When the imported input shares are located within some range, a low but positive rate of pass-through to aggregate import prices can be derived in the model. In addition, both the size and the direction of expenditure-switching effects vary according to the imported input shares.

Keywords: Exchange rate pass-through; Expenditure-switching; Shares of imported inputs (search for similar items in EconPapers)
JEL-codes: F12 F23 F31 F40 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:76:y:2021:i:c:p:817-835

DOI: 10.1016/j.iref.2021.07.017

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