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Exchange‐rate pass‐through at the product level

Author

Listed:
  • Guillaume Gaulier
  • Amina Lahrèche‐Révil
  • Isabelle Méjean

Abstract

. We use a detailed database to investigate exchange‐rate pass‐through at the product level for a large number of countries. The empirical analysis suggests that pricing behaviours are dichotomous, with complete pass‐through in around 25% of sectors and significant pricing‐to‐market in the remaining ones. Average long‐run pass‐through coefficient is close to 80%; this result hides a strong heterogeneity of pass‐through behaviours across sectors. Even when composition effects are controlled for, average pass‐through varies across importing countries. The econometric analysis shows that pass‐through tends to be higher in volatile environments; in less developed countries; in weakly integrated markets. Cet article utilise une base de données détaillée pour analyser l'effet du taux de change sur les prix à l'exportation, mesurés au niveau du produit. L'analyse empirique suggère que les comportements des prix sont dichotomiques: dans 25% des secteurs, les mouvements de change se répercutent entièrement sur les prix à l'importation tandis que la transmission est incomplète pour les autres. Le coefficient moyen de transmission est de 80%à long terme. Ce résultat cache cependant une grande hétérogénéité des comportements de transmission selon les secteurs. De plus, même quand on standardise pour tenir compte des effets de composition, le coefficient moyen de transmission varie selon les pays importateurs. En particulier, l'analyse économétrique montre que l'effet de transmission est plus élevé i) dans les environnements volatils, ii) dans les pays moins développés, et iii) dans les marchés plus faiblement intégrés.

Suggested Citation

  • Guillaume Gaulier & Amina Lahrèche‐Révil & Isabelle Méjean, 2008. "Exchange‐rate pass‐through at the product level," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(2), pages 425-449, May.
    • Handle: RePEc:wly:canjec:v:41:y:2008:i:2:p:425-449
    DOI: 10.1111/j.1365-2966.2008.00469.x
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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