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Exchange Rate Pass-Through to Swedish Import Prices

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  • Adolfson, Malin

    ()
    (Department of Economics)

Abstract

Swedish import price determination is investigated using disaggregated monthly data from 1980:1 to 1995:05 for eight different industries. The cointegration analysis indicates two cointegrating relations, in all industries, between import prices, the exchange rate, world market prices and domestic prices. Two- equations systems involve an unclear definition of long-run exchange rate pass-through. Pass-through is defined as the total effect a nominal exchange-rate change has on the import price. The estimate thus includes the direct effect on import prices as well as the effect working through home market prices. Total pass-through estimates indicate a limited pass-through and thus pricing to market behaviour in the majority of industries. The estimates range from 27% to 160%. Tests of linear restrictions on the cointegrating vectors indicate a complete long-run pass-through in most industries. Short-run pass-through is limited to about 25%.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 123.

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Length: 29 pages
Date of creation: Sep 1996
Date of revision:
Publication status: Published in Finnish Economic Papers, 1997, pages 81-98.
Handle: RePEc:hhs:hastef:0123

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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Web page: http://www.hhs.se/
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Related research

Keywords: Pricing to market; pass-through; exchange rates; import prices; cointegration;

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References

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  1. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  2. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  3. Jayant Menon, 1992. "Exchange rates and prices of Australian manufactured exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(4), pages 695-710, December.
  4. Gottfries, N., 1994. "Market Shares, Financial Constraints, and Pricing Behavior in the Export Industry," Papers 586, Stockholm - International Economic Studies.
  5. 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.
  6. Sven W. Arndt & J. David Richardson, 1988. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Adolfson, Malin, 2002. "Implications of Exchange Rate Objectives under Incomplete Exchange Rate Pass-Through," Working Paper Series 135, Sveriges Riksbank (Central Bank of Sweden).
  2. Adolfson, Malin, 2007. "Incomplete exchange rate pass-through and simple monetary policy rules," Journal of International Money and Finance, Elsevier, vol. 26(3), pages 468-494, April.
  3. Abdulnasser Hatemi-J & Manuchehr Irandoust, 2004. "Is Pricing to Market Behavior a Long-Run Phenomenon? A Non-Stationary Panel Analysis," Empirica, Springer, vol. 31(1), pages 55-67, March.
  4. Robin Pope & Reinhard Selten & Sebastian Kube & Jürgen von Hagen, 2006. "Experimental Evidence on the Benefits of Eliminating Exchange Rate Uncertainties and Why Expected Utility Theory causes Economists to Miss Them," Labsi Experimental Economics Laboratory University of Siena 010, University of Siena.
  5. Adolfson, Malin, 2001. "Optimal Monetary Policy Delegation under Incomplete Exchange Rate Pass-Through," Working Paper Series in Economics and Finance 477, Stockholm School of Economics.
  6. Guneratne Banda Wickremasinghe & Param Silvapulle, 2004. "Exchange Rate Pass-Through to Manufactured Import Prices: The Case of Japan," International Trade 0406006, EconWPA.

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