Advanced Search
MyIDEAS: Login to save this article or follow this journal

Passthrough of Exchange Rate and Tariffs into Import Prices of India: Currency Depreciation versus Import Liberalization

Contents:

Author Info

  • Sushanta Mallick
  • Helena Marques

Abstract

This paper examines the extent of passthrough of exchange rate and tariff changes into import prices using sectoral panel data (at the two-digit SITC level) for the post-reform period in India (1990-2001). After having controlled for unobserved effects that might have an impact on the import prices by using sector dummies, we find that on average exchange rate passthrough (ERPT) is a dominant effect compared to tariff rate passthrough (TRPT) in explaining changes in India's import prices. The sectoral panel results suggest that the passthrough of exchange rates and tariff rates varies across products. ERPT into import prices is significant in 12 industries, whereas TRPT is significant only in six industries, with full passthrough. However, ERPT is incomplete only in four industries, but TRPT is incomplete in 36 industries, which means that firms exporting to India more frequently adopt strategies to maintain their market share against tariffs than against exchange rate changes. The sectoral differences in passthrough seem to be related to the sector's share in total imports and the sector's effective protection rate. Hence, India's relatively high levels of protection have an impact on the behavior of foreign exporters. Copyright � 2008 The Authors. Journal compilation � 2008 Blackwell Publishing Ltd.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-9396.2008.00774.x
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 16 (2008)
Issue (Month): 4 (09)
Pages: 765-782

as in new window
Handle: RePEc:bla:reviec:v:16:y:2008:i:4:p:765-782

Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=0965-7576

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
  2. Michael Bleaney, 1997. "Invoicing-Currency Effects in the Pricing of Japanese Exports of Manufactures," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 30(4), pages 968-74, November.
  3. Knetter, Michael M., 1994. "Is export price adjustment asymmetric?: evaluating the market share and marketing bottlenecks hypotheses," Journal of International Money and Finance, Elsevier, Elsevier, vol. 13(1), pages 55-70, February.
  4. Vijay Joshi, 2003. "India and the Impossible Trinity," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 26(4), pages 555-583, 04.
  5. repec:ltr:wpaper:1992.32 is not listed on IDEAS
  6. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
  7. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 9(2), pages 197-231, June.
  8. Sergio Rebelo & Ariel Burstein & Martin Eichenbaum, 2004. "Large Devaluations and the Real Exchange Rate," 2004 Meeting Papers, Society for Economic Dynamics 137, Society for Economic Dynamics.
  9. Jeffrey A. Frankel & David C. Parsley & Shang-Jin Wei, 2005. "Slow Passthrough Around the World: A New Import for Developing Countries?," NBER Working Papers 11199, National Bureau of Economic Research, Inc.
  10. Yang, Yung Y & Hwang, Min, 1994. "Price Behavior in Korean Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 461-70, August.
  11. Feenstra, Robert C. & Gagnon, Joseph E. & Knetter, Michael M., 1996. "Market share and exchange rate pass-through in world automobile trade," Journal of International Economics, Elsevier, Elsevier, vol. 40(1-2), pages 187-207, February.
  12. Jayant Menon, 1992. "Exchange rates and prices of Australian manufactured exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 128(4), pages 695-710, December.
  13. Michael B. Devereux & Philip R. Lane, 2000. "Exchange Rates and Monetary Policy in Emerging Market Economies," Working Papers, Hong Kong Institute for Monetary Research 072000, Hong Kong Institute for Monetary Research.
  14. Prema-chandra Athukorala & Jayant Menon, 1992. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Working Papers, School of Economics, La Trobe University 1992.32, School of Economics, La Trobe University.
  15. Campa, Jose M. & Goldberg, Linda S., 2002. "Exchange rate pass-through into import prices: A macro or micro phenomenon?," IESE Research Papers, IESE Business School D/475, IESE Business School.
  16. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, Elsevier, vol. 108(1), pages 1-24, May.
  17. Koch, Paul D. & Rosensweig, Jeffrey A., 1992. "The dollar and the U.S. terms of trade," Journal of Macroeconomics, Elsevier, Elsevier, vol. 14(3), pages 467-486.
  18. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, Econometric Society, vol. 63(4), pages 891-951, July.
  19. Douglas Steel & Alan King, 2004. "Exchange Rate Pass-through: The Role of Regime Changes," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 18(3), pages 301-322.
  20. Engel, Charles, 2002. "The Responsiveness of Consumer Prices to Exchange Rates: A Synthesis of Some New Open Economy Macro Models," Manchester School, University of Manchester, vol. 70(0), pages 1-15, Supplemen.
  21. Goldberg, Pinelopi Koujianou & Knetter, Michael M., 1999. "Measuring the intensity of competition in export markets," Journal of International Economics, Elsevier, Elsevier, vol. 47(1), pages 27-60, February.
  22. Broda, Christian, 2004. "Terms of trade and exchange rate regimes in developing countries," Journal of International Economics, Elsevier, Elsevier, vol. 63(1), pages 31-58, May.
  23. Montek S. Ahluwalia, 2006. "India's Experience with Globalisation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 39(1), pages 1-13, 03.
  24. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, Elsevier, vol. 27(1-2), pages 25-45, August.
  25. Eleanor Doyle, 2004. "Exchange rate pass-through in a small open economy: the Anglo-Irish case," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(5), pages 443-455.
  26. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, Elsevier, vol. 115(1), pages 53-74, July.
  27. Jiawen Yang, 1997. "Exchange Rate Pass-Through In U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 95-104, February.
  28. Athukorala, Premachandra, 1991. "Exchange rate pass-through : The case of Korean exports of manufactures," Economics Letters, Elsevier, Elsevier, vol. 35(1), pages 79-84, January.
  29. Gagnon, Joseph E. & Knetter, Michael M., 1995. "Markup adjustment and exchange rate fluctuations: evidence from panel data on automobile exports," Journal of International Money and Finance, Elsevier, Elsevier, vol. 14(2), pages 289-310, April.
  30. Froot, Kenneth A & Klemperer, Paul D, 1989. "Exchange Rate Pass-Through When Market Share Matters," American Economic Review, American Economic Association, American Economic Association, vol. 79(4), pages 637-54, September.
  31. Ariel T. Burstein & Joao C. Neves & Sergio Rebelo, 2000. "Distribution Costs and Real Exchange Rate Dynamics During Exchange-Rate-Based Stabilizations," RCER Working Papers 473, University of Rochester - Center for Economic Research (RCER).
  32. Yang, Jiawen, 1998. "Pricing-to-market in U.S. imports and exports: A time series and cross-sessional study," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 38(4), pages 843-861.
  33. Sushanta Mallick & Helena Marques, 2006. "Sectoral Exchange Rate Pass-Through: Testing The Impact Of Policy Reforms In India," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 53(2), pages 280-303, 05.
  34. Jakob Madsen, 1998. "Errors-in-variables, supply side effects, and price elasticities in foreign trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 134(4), pages 612-637, December.
  35. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, American Economic Association, vol. 79(1), pages 198-210, March.
  36. Corsetti, Giancarlo & Dedola, Luca, 2005. "A macroeconomic model of international price discrimination," Journal of International Economics, Elsevier, Elsevier, vol. 67(1), pages 129-155, September.
  37. Dominique Gross & Nicolas Schmitt, 1996. "Exchange rate pass-through and rivalry in the Swiss automobile market," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 132(2), pages 278-303, September.
  38. Mark P. Taylor, 2003. "Purchasing Power Parity," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 11(3), pages 436-452, 08.
  39. Jaewoo Lee, 1997. "The Response Of Exchange Rate Pass-Through To Market Concentration In A Small Economy: The Evidence From Korea," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 142-145, February.
  40. Tange, Toshiko, 1997. "Exchange rates and export prices of Japanese manufacturing," Journal of Policy Modeling, Elsevier, Elsevier, vol. 19(2), pages 195-206, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Prema-chandra Athukorala, 1990. "Exchange Rate Pass Through: The Case of Korean Exports of Manufacturers," Working Papers, School of Economics, La Trobe University 1990.08, School of Economics, La Trobe University.
  2. Prema-chandra Athukorala & Jayant Menon, 1992. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Working Papers, School of Economics, La Trobe University 1992.32, School of Economics, La Trobe University.
  3. Robert A. Blecker, 2012. "Stolper-Samuelson Revisited: Trade and Distribution with Oligopolistic Profits," Working Papers, American University, Department of Economics 2012-06, American University, Department of Economics.
  4. Mallick, Sushanta & Marques, Helena, 2012. "Pricing to market with trade liberalization: The role of market heterogeneity and product differentiation in India’s exports," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(2), pages 310-336.
  5. M. Abimbola Oyinlola & M. Adetunji Babatunde, 2009. "A Bound Testing Analysis Of Exchange Rate Pass- Through To Aggregate Import Prices In Nigeria: 1980-2006," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 34(2), pages 97-109, December.
  6. Yushi Yoshida, 2009. "Market Share and Exchange Rate Pass-through:Competition among Exporters of the Same Nationality," Discussion Papers, Kyushu Sangyo University, Faculty of Economics 37, Kyushu Sangyo University, Faculty of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:16:y:2008:i:4:p:765-782. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.