Daily Exchange Rate Pass-Through into Micro Prices
13 Pages Posted: 5 Feb 2017 Last revised: 9 May 2018
Date Written: May 3, 2018
This paper estimates the exchange rate pass-through (ERPT) by using good-level daily data on wholesale prices of imported agricultural products, where the identification is achieved by using daily data on the domestic inflation rate. The results of standard empirical analyses are in line with existing studies that employ lower frequencies of data by showing evidence for incomplete daily ERPT of about 5 percent. The key innovation is achieved when nonlinearities in ERPT are considered, where ERPT is doubled to about 10 percent when daily nominal exchange rate changes are above 0.55 percent, daily frequencies of price change are above 3.12 percent, and storage life of a product is above 10 weeks. Important policy implications follow.
Keywords: Daily Agricultural Prices, Exchange Rate Pass-Through, Good-Level Analysis
JEL Classification: E31, F14, F31
Suggested Citation: Suggested Citation