Daily exchange rate pass-through into micro prices

Renzo Alvarez, Amin Shoja, Syed Uddin and Hakan Yilmazkuday

Applied Economics Letters, 2019, vol. 26, issue 6, 440-445

Abstract: This article estimates the exchange rate pass-through (ERPT) by using good-level daily data on wholesale prices of imported agricultural products, where the identification is achieved by using daily data on the domestic inflation rate. The results of standard empirical analyses are in line with existing studies that employ lower frequencies of data by showing evidence for incomplete daily ERPT of about $$5$$5%. The key innovation is achieved when nonlinearities in ERPT are considered, where ERPT is doubled to about $$10$$10% when daily nominal exchange rate changes are above $$0.55$$0.55%, daily frequencies of price change are above $$3.12$$3.12% and storage life of a product is above $$10$$10 weeks. Important policy implications follow.

Date: 2019
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Working Paper: Daily Exchange Rate Pass-through into Micro Prices (2018)
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DOI: 10.1080/13504851.2018.1486972

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