Exchange Rate Passthrough to Export Prices: Assessing Cross-Country Evidence

17 Pages Posted: 27 Apr 2009

See all articles by Robert J. Vigfusson

Robert J. Vigfusson

Federal Reserve Board - Trade and Quantitative Studies

Nathan Sheets

Federal Reserve Board

Joseph Gagnon

Peterson Institute

Abstract

A growing empirical literature reports evidence of a decline in exchange rate passthrough to import prices in a number of industrial countries. Our paper complements this literature by examining passthrough 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 find that the prices charged on exports to the United States are more responsive to the exchange rate than are export prices to other destinations, which is consistent with results in the literature that import price passthrough in the US market is relatively low. In addition, the exchange rate sensitivity of export prices over time has 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).

Suggested Citation

Vigfusson, Robert John and Sheets, Nathan and Gagnon, Joseph, Exchange Rate Passthrough to Export Prices: Assessing Cross-Country Evidence. Review of International Economics, Vol. 17, Issue 1, pp. 17-33, February 2009. Available at SSRN: https://ssrn.com/abstract=1381789 or http://dx.doi.org/10.1111/j.1467-9396.2008.00801.x

Robert John Vigfusson (Contact Author)

Federal Reserve Board - Trade and Quantitative Studies ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States

Nathan Sheets

Federal Reserve Board ( email )

20th St. and Constitution Ave.
Washington, DC 20551
United States
202-452-3819 (Phone)
202-736-5638 (Fax)

Joseph Gagnon

Peterson Institute ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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