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The Pass-Through of Exchange Rate Changes to Import Prices

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Author Info

  • Ketelsen, Uwe
  • Kortelainen, Mika

    (Bank of Finland Research)

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    Abstract

    In this paper we analyze the empirical relevance of exchange rate pass-through for Finland, Sweden and Denmark during the period 1980–1994. Further, we attempt to determine if there has been a structural change in the pass-through relationship in the1990s. We find that about half the changes in exchange rates and world prices are passed through to import prices within one year, and three-quarters of such changes are passed through to import prices in two years. Moreover, there are no major differences among countries. Parameter constancy tests indicate the possibility of a structural change where the pass-through has slowed in recent years. Possible explanations of this are that the exchange rate regime has changed and competition has increased.

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    File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/DP_26_1996.pdf
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    Bibliographic Info

    Paper provided by Bank of Finland in its series Research Discussion Papers with number 26/1996.

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    Length: 33 pages
    Date of creation: 29 Oct 1996
    Date of revision:
    Handle: RePEc:hhs:bofrdp:1996_026

    Contact details of provider:
    Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
    Web page: http://www.suomenpankki.fi/en/
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    Related research

    Keywords: exchange rate pass-through; import prices; structural change;

    References

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    1. Nerlove, Marc, 1971. "Further Evidence on the Estimation of Dynamic Economic Relations from a Time Series of Cross Sections," Econometrica, Econometric Society, vol. 39(2), pages 359-82, March.
    2. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
    3. Peter Hooper & Catherine L. Mann, 1989. "Exchange Rate Pass-through in the 1980s: The Case of U.S. Imports of Manufactures," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 297-337.
    4. Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc.
    5. Atish R. Ghosh & Holger C. Wolf, 1994. "Pricing in International Markets: Lessons From The Economist," NBER Working Papers 4806, National Bureau of Economic Research, Inc.
    6. Athukorala, Premachandra & Menon, Jayant, 1994. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Economic Journal, Royal Economic Society, vol. 104(423), pages 271-81, March.
    7. Rudiger Dornbusch, 1985. "Exchange Rates and Prices," NBER Working Papers 1769, National Bureau of Economic Research, Inc.
    8. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
    9. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
    10. Peter Hooper & Jaime Marquez, 1993. "Exchange rates, prices, and external adjustment in the United States and Japan," International Finance Discussion Papers 456, Board of Governors of the Federal Reserve System (U.S.).
    11. Joseph E. Gagnon & Michael M. Knetter, 1990. "Pricing to market in international trade: evidence from panel data on automobiles and total merchandise," International Finance Discussion Papers 389, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:
    1. Sabine Stephan, 2005. "Pricing-to-Market Effects in Foreign Trade Prices. Evidence from a Cointegration Approach for Germany," IMK Working Paper 07-2005, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Stahn, Kerstin, 2009. "Changes in import pricing behaviour: the case of Germany," Discussion Paper Series 1: Economic Studies 2009,14, Deutsche Bundesbank, Research Centre.
    3. Kerstin Stahn, 2011. "Changes in Import Pricing Behaviour: Evidence for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(4), pages 522-545, August.

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