This paper uses a detailed database to investigate exchange-rate pass-through at the product level, for a large number of countries. Since the database provides harmonized trade flows, pass-through in both export and import prices can be investigated consistently. The empirical analysis suggests that pricing behaviors are dichotomic: while pass-through is complete in 30 to 40% of sectors, there is significant pricing-to-market in the remaining ones. The average long-run pass-through coefficient is nevertheless quite high, close to 80% on average. This result however hides a strong heterogeneity of pass-through behaviors across sectors and exporting countries, and to a lesser extent across importers. Trying to disentangle composition effects from structural factors, the analysis suggests that a large part of cross-country differences is attributable to composition effects. Still, the pass-through is on average higher i) in volatile environments, ii) in less developed countries, iii) in little integrated markets.
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Paper provided by CEPII research center in its series Working Papers with number
2006-02.
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F31 - International Economics - - International Finance - - - Foreign Exchange F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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