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Time-Varying Pass-Through from Import Prices to Consumer Prices: Evidence from an Event Study with Real-Time Data

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Author Info
Amstad, Marlene
Fischer, Andreas M

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Abstract

This paper analyzes the pass-through from import prices to CPI inflation in real time. Our strategy follows an event-study approach, which compares inflation forecasts before and after import price releases. Inflation forecasts are modelled using a dynamic factor procedure that relies on daily panels of Swiss data. We find strong evidence that monthly import price releases provide important information for CPI inflation forecasts and that the behaviour of updated forecasts is consistent with a time-varying pass-through. The robustness of this latter result is underpinned in two ways: an alternative CPI measure that excludes price components subject to administered pricing and as well as panels capturing different levels of information breadth. Besides implying a time-varying pass-through, our empirical findings cast doubt on a prominent role of sticky prices for the low pass-through findings.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5395.

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Date of creation: Dec 2005
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Handle: RePEc:cpr:ceprdp:5395

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Keywords: common factors daily panels pass-through

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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  1. Mark Bils and Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
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  2. Andreas Fischer & Marlene Amstad, 2004. "Sequential Information Flow and Real-Time Diagnosis of Swiss Inflation: Intra-Monthly DCF Estimates for a Low-Inflation Environment," Working Papers 04.06, Swiss National Bank, Study Center Gerzensee. [Downloadable!]
    Other versions:
  3. Eiji Fuji & Jeannine Bailliu, 2004. "Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical Investigation," Computing in Economics and Finance 2004 135, Society for Computational Economics.
    Other versions:
  4. Ariel Burstein, Martin Eichenbaum, and Sergio Rebelo, 2005. "Large Devaluations and the Real Exchange Rate," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 742-784, August.
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  5. Marlene Amstad & Andreas Fischer, 2005. "Shock Identification of Macroeconomic Forecasts based on Daily Panels," Working Papers 05.02, Swiss National Bank, Study Center Gerzensee. [Downloadable!]
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  6. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Filippo Altissimo & Antonio Bassanetti & Riccardo Cristadoro & Mario Forni & Marco Lippi & Lucrezia Reichlin & Giovanni Veronese, 2001. "A real time coincident indicator of the euro area business cycle," Temi di discussione (Economic working papers) 436, Bank of Italy, Economic Research Department. [Downloadable!]
  8. Altissimo, Filippo & Bassanetti, Antonio & Cristadoro, Riccardo & Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia & Veronese, Giovanni, 2001. "EuroCOIN: A Real Time Coincident Indicator of the Euro Area Business Cycle," CEPR Discussion Papers 3108, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Can sticky price models generate volatile and persistent real exchange rates?," Staff Report 223, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  10. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September. [Downloadable!] (restricted)
  11. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April. [Downloadable!] (restricted)
  12. Dalia Hakura & Ehsan U. Choudhri, 2001. "Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?," IMF Working Papers 01/194, International Monetary Fund. [Downloadable!]
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