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Effects of a Free Trade Agreement on the Exchange Rate Pass‐through to Import Prices

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  • Arnoldo López Marmolejo

Abstract

This paper investigates the effect of trade liberalization on the exchange rate pass-through (ERPT) to import prices. To do so, it employs an empirical estimation of the effects of NAFTA on the Mexican ERPT, and uses a Ricardian general equilibrium model. The model identifies the direct relationship between the tariffs and the pass-through by good. The second channel is the effect that tariffs have on the composition of imports, altering indirectly the aggregate pass-through.

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Bibliographic Info

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

Volume (Year): 19 (2011)
Issue (Month): 3 (08)
Pages: 475-493

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Handle: RePEc:bla:reviec:v:19:y:2011:i:3:p:475-493

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