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Imported Intermediate Goods and Incomplete Exchange Rate Pass-Through into Export Prices

Alexander Firanchuk

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: This paper analyses the effect of imported inputs and the exporting country share on the degree of exchange rate pass-through (ERPT) into export prices. I present a model where firms set variable markups under oligopoly competition and imported inputs affect marginal cost. It makes two predictions: (i) the imported input share reduces ERPT (ii) the exporting country share in a destination market increases ERPT. Using industry-level data, I test the hypotheses for 57 countries over the period 2000-2015. For trade between advanced economies, imported inputs reduce ERPT, but only in the case of producer currency movements. Controlling for exporting country share, the pass-through elasticity is 39% when imported inputs are not used, but 11% when the share of imported inputs in gross exports rises to one half.

Keywords: exchange rate pass-through; export prices; global value chains (search for similar items in EconPapers)
JEL-codes: F12 F14 F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int, nep-mon and nep-opm
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:182400

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