The effect of exchange rate pass-through on import prices is a question of significant interest to many nations and especially those with permanent trade deficit. Japan is traditional net importer of food products in general and meat products including beef, pork, and poultry in particular. Most of the Japanese meat imports come from a few countries thus making Japan potentially very sensitive to the swings in one or a few bilateral exchange rates. This was the motivation to estimate the exchange rate pass-through effect on meat import prices in Japan. Interestingly, results for different meats differ substantially. For instance, poultry import prices indicate almost complete exchange rate pass-through, while beef import prices indicate partial (relatively high) exchange rate pass-through. Import prices of pork, on the other hand, indicate zero exchange rate pass-through. In terms of competitiveness, these results suggest almost perfectly competitive markets among poultry importing firms, somewhat competitive markets among beef importing firms, and a high degree of market power among the pork importing firms. One of the key contributions of this paper is the use of the meats imports weighted exchange rates in the analysis. The standard practice in previous agricultural trade studies related to either exchange rate pass-through or pricing to market was to use the aggregate trade weighted exchange rates usually provided by the Central Bank authorities or sources. Our approach is novel and is due to recommendations from Goldberg (2004) and Pollard and Coughlin (2006).
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Length: Date of creation: 2007 Date of revision: Handle: RePEc:ags:aaea07:9967
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