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Monthly pass-through ratios

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Author Info
Marlene Amstad
Andreas M. Fischer

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Abstract

This paper estimates monthly pass-through ratios from import prices to consumer prices in real time. Conventional time series methods impose restrictions to generate exogenous shocks on exchange rates or import prices when estimating pass-through coefficients. Instead, a natural experiment based on data releases defines our shock to foreign prices. Our estimation strategy follows an event-study approach based on monthly releases in import prices. Projections from a dynamic common factor model with daily panels before and after monthly releases of import prices define the shock. This information shock allows us to recover a monthly pass-through ratio. We apply our identification procedure to Swiss prices and find strong evidence that the monthly pass-through ratio is around 0.3. Our real-time estimates yield higher pass-through ratios than time series estimates.

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File URL: http://dallasfed.org/institute/wpapers/2009/0026.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 26.

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Date of creation: 2009
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Handle: RePEc:fip:feddgw:26

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Keywords: Monetary policy ; Econometric models ; Foreign exchange rates ; Prices;

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  1. Shambaugh, Jay, 2008. "A new look at pass-through," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 560-591, June. [Downloadable!] (restricted)
  2. Mario Marazzi & Nathan Sheets & Robert J. Vigfusson & Jon Faust & Joseph Gagnon & Jaime Marquez & Robert F. Martin & Trevor Reeve & John Rogers, 2005. "Exchange rate pass-through to U.S. import prices: some new evidence," International Finance Discussion Papers 833, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  3. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September. [Downloadable!] (restricted)
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  4. Jonathan McCarthy, 2000. "Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies," Staff Reports 111, Federal Reserve Bank of New York. [Downloadable!]
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  5. Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June. [Downloadable!] (restricted)
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This page was last updated on 2009-11-20.

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