Pass-Through of Imported Input Prices to Domestic Producer Prices: Evidence from Sector-Level Data

26 Pages Posted: 21 Jan 2016

See all articles by JaeBin Ahn

JaeBin Ahn

International Monetary Fund (IMF)

Chang-Gui Park

The Bank of Korea

Chanho Park

Bank of Korea-International Department

Multiple version iconThere are 2 versions of this paper

Date Written: January 19, 2016

Abstract

Motivated by stylized facts pointing to a dominant role of imported inputs in transmitting external price shocks to domestic prices, this paper zooms in to study the pass-through of imported input costs to domestic producer prices. Our approach constructs effective input price indices from sector-level price data combined with sector-level information on input-output linkages. Applying an error correction model specification to sector-level output and input prices, the long-run pass-through rate of effective imported input costs to domestic producer prices is estimated to be around 70 percent in Korea and almost 100 percent in selected European countries.

Keywords: Exchange rate pass-through, Imported input cost pass-through, Inflation

JEL Classification: E3, F3, F4

Suggested Citation

Ahn, JaeBin and Park, Chang-Gui and Park, Chanho, Pass-Through of Imported Input Prices to Domestic Producer Prices: Evidence from Sector-Level Data (January 19, 2016). Bank of Korea WP 2016-2. Available at SSRN: https://ssrn.com/abstract=2717838 or http://dx.doi.org/10.2139/ssrn.2717838

JaeBin Ahn (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Chang-Gui Park

The Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Chanho Park

Bank of Korea-International Department ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

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