EconPapers    
Economics at your fingertips  
 

Effects of a Mandatory Local Currency Pricing Law on the Exchange Rate Pass-Through

Renzo Castellares () and Hiroshi Toma

No 2019-001, Working Papers from Banco Central de Reserva del Perú

Abstract: We analyze whether a 2004 law requiring firms to express prices in the local currency in Peru, which had experienced a high degree of price dollarization, affected the exchange rate pass-through (ERPT). We hypothesize that the enactment of the law introduced menu costs for those firms that set their prices in dollars, prompting several of them to make a permanent switch from dollars to soles. Using disaggregated consumer price index (CPI) data, we find that after the enactment of the law, the ERPT was completely offset for non-durable goods with dollarized prices, and partially offset for durable goods with dollarized prices. These effects could be due to different shares of the imported content, market power and varying mark-ups.

Keywords: exchange-rate pass through; price dollarization; local currency pricing (search for similar items in EconPapers)
JEL-codes: D04 D49 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon and nep-opm
Date: 2019-01
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.bcrp.gob.pe/docs/Publicaciones/Document ... trabajo-001-2019.pdf Application/pdf

Related works:
Working Paper: Effects of a mandatory local currency pricing law on the exchange rate pass-through (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rbp:wpaper:2019-001

Access Statistics for this paper

More papers in Working Papers from Banco Central de Reserva del Perú Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit ().

 
Page updated 2019-11-23
Handle: RePEc:rbp:wpaper:2019-001