Size Matters: Asymmetric Exchange Rate Pass-Through at the Industry Level

University of Nottingham Research Paper No. 2004/13

37 Pages Posted: 6 May 2005

See all articles by Patricia S. Pollard

Patricia S. Pollard

Federal Reserve Bank of St. Louis, Research Division

Cletus C. Coughlin

Federal Reserve Bank of St. Louis - Research Division

Date Written: 2004

Abstract

We analyze exchange rate pass-through into U.S. import prices for 29 industries to address two questions. First, does the direction of a change in the exchange rate affect the degree of pass-through? Second, does the size of a change in the exchange rate matter for pass-through? We find that firms in over half the industries respond asymmetrically to appreciation and depreciations, but the direction of asymmetry varies. Likewise, most firms respond asymmetrically to large and small changes in the exchange rate and pass-through is generally positively related to the size of the change. When taking into account both direction and size effects we find that the size effect dominates.

Keywords: pass-through,asymmetry,exchange rate

JEL Classification: F14, F31

Suggested Citation

Pollard, Patricia S. and Coughlin, Cletus C., Size Matters: Asymmetric Exchange Rate Pass-Through at the Industry Level (2004). University of Nottingham Research Paper No. 2004/13. Available at SSRN: https://ssrn.com/abstract=716001 or http://dx.doi.org/10.2139/ssrn.716001

Patricia S. Pollard (Contact Author)

Federal Reserve Bank of St. Louis, Research Division ( email )

411 Locust St
P.O. Box 442
St. Louis, MO 63011
United States
314-444-8557 (Phone)
314-444-8731 (Fax)

Cletus C. Coughlin

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

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