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Heads I Win, Tails You Lose: Asymmetry in Exchange Rate Pass-Through Into Import Prices

Brun-Aguerre Raphael, Ana-Maria Fuertes () and Matthew Greenwood-Nimmo

MPRA Paper from University Library of Munich, Germany

Abstract: We analyse exchange rate pass-through into import prices for a large group of 33 emerging and developed economies from 1980Q1 to 2010Q4. Our error correction models permit asymmetric pass-through for currency appreciations and depreciations over three horizons of interest: on impact, in the short run and in the long run. We find that depreciations are typically passed-through more strongly than appreciations in the long-run, suggesting that exporters may exert a degree of long-run pricing power. This asymmetry is stronger in economies which are more import dependent but is moderated by freedom to trade and a positive output gap. Given that this pass-through asymmetry is welfare-reducing for consumers in the destination market, a key macroeconomic implication is that import-dependent economies, in particular, can benefit from trade liberalisation.

Keywords: Exchange Rate Pass-Through; Asymmetry; Nonlinear ARDL Model; Random Coefficients Panel Data Model; Emerging Markets. (search for similar items in EconPapers)
JEL-codes: F10 F14 F30 F31 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-int and nep-opm
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Citations: View citations in EconPapers (7) Track citations by RSS feed

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Journal Article: Heads I win; tails you lose: asymmetry in exchange rate pass-through into import prices (2017) Downloads
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