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A new look at pass-through

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  • Shambaugh, Jay

Abstract

This paper examines the relationship between exchange rates and prices. Rather than assuming exchange rate changes are exogenous shocks that affect prices, I use a long run restrictions VAR to identify shocks and explore the way domestic prices, import prices and exchange rates react to a variety of shocks. Consumer price pass-through is nearly complete in response to some shocks, but low in response to others. Alternatively, import prices and exchange rates typically respond in the same direction, and pass-through seems quick. This supports the idea that import prices are set in the producer's currency and that lower CPI pass-through is a result of changes in quantities or margins further down the supply chain.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 27 (2008)
Issue (Month): 4 (June)
Pages: 560-591

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Handle: RePEc:eee:jimfin:v:27:y:2008:i:4:p:560-591

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Web page: http://www.elsevier.com/locate/inca/30443

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References

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Citations

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Cited by:
  1. Thomas Plümper & Vera E. Troeger, 2006. "Fear of Floating and the External Effects of Currency Unions," The Institute for International Integration Studies Discussion Paper Series iiisdp181, IIIS.
  2. Rajmund Mirdala, 2014. "Exchange Rate Pass-Through to Domestic Prices under Different Exchange Rate Regimes," William Davidson Institute Working Papers Series wp1070, William Davidson Institute at the University of Michigan.
  3. Marlene Amstad & Andreas M. Fischer, 2009. "Monthly pass-through ratios," Globalization and Monetary Policy Institute Working Paper 26, Federal Reserve Bank of Dallas.
  4. Lian An & Jian Wang, 2011. "Exchange rate pass-through: evidence based on vector autoregression with sign restrictions," Globalization and Monetary Policy Institute Working Paper 70, Federal Reserve Bank of Dallas.
  5. Cover, James P. & Mallick, Sushanta K., 2012. "Identifying sources of macroeconomic and exchange rate fluctuations in the UK," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1627-1648.
  6. Thomas Plümper & Eric Neumayer, 2008. "Exchange rate regime choice with multiple key currencies," LSE Research Online Documents on Economics 25164, London School of Economics and Political Science, LSE Library.
  7. Prasad Bhattacharya & Cem A. Karayalcin & Dimitrios D. Thomakos, 2006. "Exchange Rate Pass-Through and Relative Prices: An Industry-Level Empirical Investigation," Economics Series 2006_17, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  8. María Lorena Marí del Cristo & Marta Gómez-Puig, 2012. "“Pass-through in dollarized countries: should Ecuador abandon the U.S. Dollar?”," IREA Working Papers 201216, University of Barcelona, Research Institute of Applied Economics, revised Oct 2012.
  9. Barhoumi, Karim, 2006. "Exchange Rate Pass-Through and Structural Macroeconomic Shocks in Developing Countries: An Empirical Investigation," MPRA Paper 6573, University Library of Munich, Germany, revised 13 Oct 2007.
  10. Thomas Plümper and Eric Neumayer, 2008. "Exchange Rate Regime Choice with Multiple Key Currencies," The Institute for International Integration Studies Discussion Paper Series iiisdp264, IIIS.

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