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Monthly pass-through ratios

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  • Marlene Amstad
  • Andreas M. Fischer

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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Bibliographic Info

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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Cited by:
  1. Marlene Amstad & Andreas M. Fischer, 2009. "Do macroeconomic announcements move inflation forecasts?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 507-518.
  2. Amstad, Marlene & Potter, Simon M. & Rich, Robert W., 2014. "The FRBNY staff underlying inflation gauge: UIG," Staff Reports 672, Federal Reserve Bank of New York.

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