Effects of a Free Trade Agreement on the Exchange Rate Pass-Through to Import Prices
AbstractThis 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 InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1102.
Length: 38 pages
Date of creation: Jan 2011
Date of revision:
Ricardian model; exchange rate pass-through; NAFTA.;
Other versions of this item:
- Arnoldo López Marmolejo, 2011. "Effects of a Free Trade Agreement on the Exchange Rate Pass‐through to Import Prices," Review of International Economics, Wiley Blackwell, vol. 19(3), pages 475-493, 08.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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