Exchange Rate Pass-Through to Export Prices: Assessing Some Cross-Country Evidence
47 Pages Posted: 24 Sep 2007
Date Written: September 2007
Abstract
A growing body of empirical work has found evidence of a decline in exchange rate pass-through to import prices in a number of industrial countries. Our paper complements this work by examining pass-through from the other side of the transaction; that is, we assess the exchange rate sensitivity of export prices (denominated in the exporter's currency). We first sketch out a streamlined analytical model that highlights some key factors that determine pass-through. Using this model as reference, we find that the prices charged on exports to the United States are more responsive to the exchange rate than is the case for export prices to other destinations, which is consistent with results in the literature suggesting that import price pass-through in the U.S. market is relatively low. We also find that moves in the exchange rate sensitivity of export prices over time have been significantly affected by country and region-specific factors, including the Asian financial crisis (for emerging Asia), deepening integration with the United States (for Canada), and the effects of the 1992 ERM crisis (for the United Kingdom).
JEL Classification: E31, F30, F41
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By Maurice Obstfeld and Alan C. Stockman
-
By Maurice Obstfeld and Kenneth Rogoff
-
Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?
By Varadarajan V. Chari, Patrick J. Kehoe, ...
-
Monetary Policy and Exchange Rate Volatility in a Small Open Economy
By Jordi Galí and Tommaso Monacelli
-
Monetary Policy and Exchange Rate Volatility in a Small Open Economy
By Jordi Galí and Tommaso Monacelli
-
Monetary Policy and Exchange Rate Volatility in a Small Open Economy
By Jordi Galí and Tommaso Monacelli
-
New Directions for Stochastic Open Economy Models
By Maurice Obstfeld and Kenneth Rogoff
-
Monetary Policy in the Open Economy Revisited: Price Setting and Exchange Rate Flexibility