Estimating New Keynesian import price models

Ida Wolden Bache () and Bjørn E. Naug
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Ida Wolden Bache: Norges Bank (Central Bank of Norway)
Bjørn E. Naug: Norges Bank (Central Bank of Norway)

No 2007/15, Working Paper from Norges Bank

Abstract: We estimate a range of New Keynesian import price models for Norway and the UK. Contrary to standard pass-through regression analysis, this approach allows us to make a distinction between the parameters in theoretical price-setting rules and parameters in the expectations mechanisms. We find positive and significant effects of expected future import price growth for Norway. The estimates for the UK do not lend much support to the hypothesis that pricesetting rules are forward-looking. For both countries, the results favour a specification that incorporates both local- and producer currency pricing, but no effect of lagged import price growth. We find mixed evidence of pricing-to-market: only for the UK do the results suggest a role for domestic prices or costs in explaining import prices

Keywords: Import prices; exchange rate pass-through; New Keynesian open economy models; GMM (search for similar items in EconPapers)
JEL-codes: C32 C52 F41 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008-01-24
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2007_15

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