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Exchange rate pass-through in the global economy – the role of emerging market economies

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Author Info
Bussière, Matthieu () (BOFIT)
Peltonen, Tuomas (BOFIT)

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Abstract

This paper estimates export and import price equations for 41 countries –including 28 emerging market economies. Further, it relates the estimated elasticities to structural factors and tests for statistical breaks in the relation between trade prices and exchange rates. Results indicate that (i) the elasticity of trade prices in emerging markets is sizeable, but not significantly higher than in advanced economies; (ii) such elasticity is primarily influenced by macroeconomic factors such as the exchange rate regime and the inflationary environment, although microeconomic factors such as product differentiation also play a role; (iii) export and import price elasticities tend to be strongly correlated across countries; (iv) pass-through to import prices has declined in some advanced economies, noticeably the United States; this is consistent with a rise in pricing-to-market in several EMEs and especially with a change in the geographical composition of U.S. imports.

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Publisher Info
Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 25/2008.

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Length: 53 pages
Date of creation: 13 Jan 2009
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Handle: RePEc:hhs:bofitp:2008_025

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Related research
Keywords: emerging market economies; exchange rate pass-through; pricing-to-market; local and producer currency pricing; exchange rate regime;

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F30 - International Economics - - International Finance - - - General
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthieu Bussière & Alexander Chudik & Giulia Sestieri, 2009. "Modelling Global Trade Flows: Results from a GVAR Model," Working Paper Series 1087, European Central Bank. [Downloadable!]
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