Flexible Exchange Rates and Commodity Price Changes: The Case of Japan

Cathy L. Jabara and Nancy E. Schwartz

American Journal of Agricultural Economics, 1987, vol. 69, issue 3, 580-590

Abstract: Although agricultural commodities are often assumed to have flexible prices, little has been done to estimate exchange rate pass-through. Perfect commodity arbitrage opportunities imply complete pass-through; imperfect opportunities could lead to incomplete pass-through. Analysis of commodity price and exchange rate adjustments for five commodities exported to Japan by the United States reveals that during the 1970s, commodity prices were generally flexible. During the 1980s, when the dollar was rising, price stickiness on the part of exporters/importers contributed to inflexible prices and asymmetric exchange rate response. Specifically, an exchange rate increase was passed through for some commodities but not a decline.

Date: 1987
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