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Implications of production sharing on exchange rate pass-through

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  • Amit Ghosh

    (Department of Economics, Illinois Wesleyan University, USA)

Abstract

This paper presents a theoretical model to analyse exchange rate pass-through when there is cross-border production sharing. With production sharing, between two nations, we have pass-through at two different levels, one at the level of the imported parts and components used in making the final good and the other at the level of the final good. We find the higher the pricing-to-market at the intermediate good level, the lower the pass-through for the final good. The model is further extended to analyse three-country production sharing, substitution between two alternate sources of imported inputs. Finally, we draw some policy implications. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Amit Ghosh, 2009. "Implications of production sharing on exchange rate pass-through," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 14(4), pages 334-345.
    • Handle: RePEc:ijf:ijfiec:v:14:y:2009:i:4:p:334-345
    DOI: 10.1002/ijfe.374
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    References listed on IDEAS

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    Cited by:

    1. Chung, Wanyu, 2016. "Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data," Journal of International Economics, Elsevier, vol. 99(C), pages 237-250.
    2. Ghosh, Amit, 2013. "Exchange rate pass through, macro fundamentals and regime choice in Latin America," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 163-171.
    3. Kim, Kyungmin, 2021. "Production sharing and exchange rate pass-through," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 817-835.
    4. Syed Al-Helal Uddin, 2016. "Value-added Trade, Exchange Rate Pass-Through and Trade Elasticity: Revisiting the Trade Competitiveness," 2016 Papers pud11, Job Market Papers.

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