Exchange Rate Pass-Through, Markups, and Inventories

23 Pages Posted: 9 Dec 2012

See all articles by Adam M. Copeland

Adam M. Copeland

Federal Reserve Bank of New York

James A. Kahn

Yeshiva University; National Bureau of Economic Research (NBER)

Date Written: December 1, 2012

Abstract

A large body of research has established that exporters do not fully adjust their prices across countries in response to exchange rate movements, but instead allow their markups to vary. But while markups are difficult to observe directly, we show in this paper that inventory-sales ratios provide an observable counterpart. We then find evidence that inventory-sales ratios of imported vehicles respond to exchange rate movements to a degree consistent with pass-through on the order of 50 to 75 percent, on the high end of the range found in the literature.

Keywords: exchange rate passthrough, motor vehicles, inventories

JEL Classification: F12, L11, L62

Suggested Citation

Copeland, Adam M. and Kahn, James A., Exchange Rate Pass-Through, Markups, and Inventories (December 1, 2012). FRB of New York Staff Report No. 584, Available at SSRN: https://ssrn.com/abstract=2186609 or http://dx.doi.org/10.2139/ssrn.2186609

Adam M. Copeland (Contact Author)

Federal Reserve Bank of New York ( email )

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New York, NY 10045
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James A. Kahn

Yeshiva University ( email )

500 West 185th Street
New York, NY 10033
United States
212-340-7863 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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