Imported-Inputs Channel of Exchange Rate Pass-Through: Evidence from Korean Firm-Level Pricing Survey

JaeBin Ahn and Chang-Gui Park ()
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Chang-Gui Park: Economic Research Institute, The Bank of Korea

No 2014-11, Working Papers from Economic Research Institute, Bank of Korea

Abstract: This paper studies the imported inputs channel of exchange rate pass-through to the prices of domestically produced goods, exploring the firm-level pricing survey conducted by the Bank of Korea. The survey data reveal that imported inputs play a major role in transmitting exchange rate fluctuations to domestic producer prices, and that the degree of exchange rate pass-through tends to be nonlinear and asymmetric: it is higher when changes in exchange rate are large or when the local currency depreciates. A further investigation of the sources of nonlinearity and asymmetry supports the model's prediction that nonlinear pass-through may arise because large exchange-rate movements trigger additional indirect effects via industry-level price movements, while asymmetric pass-through can be driven by capacity constrained firms.

Keywords: Exchange rate pass-through; Imported inputs channel; Nonlinearity; Asymmetry (search for similar items in EconPapers)
JEL-codes: E3 F1 F3 F4 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014-04-26
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Citations: View citations in EconPapers (1)

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http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2014-11.pdf Working Paper, 2014 (application/pdf)

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