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Pass-through Across Products and Time

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  • Joseph Vavra

    (University of Chicago)

  • David Berger

    (Northwestern University)

Abstract

How do import prices respond to exchange rate changes, and does this response vary across products or across time? We document two new and related facts: 1. Individual items with high price change variance have greater exchange rate pass-through. 2. During times when the cross-sectional variance of price changes is high, there is greater exchange rate pass-through. We show that these results are not driven by differences in the frequency of adjustment across products or time. We explore the extent to which these facts can be explained by time-varying product level volatility and their implications for aggregate inflation and monetary policy. Existing work has documented that trade prices declined only modestly in 2008 at the same time that trade volumes collapsed. Our evidence makes this fact even more puzzling, since pass-through is unusually high during this same period.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 452.

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Date of creation: 2013
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Handle: RePEc:red:sed013:452

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References

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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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  1. Neiman, Brent, 2010. "Stickiness, synchronization, and passthrough in intrafirm trade prices," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 295-308, April.
  2. Peter J. Klenow & Jonathan L. Willis, 2006. "Real rigidities and nominal price changes," Research Working Paper RWP 06-03, Federal Reserve Bank of Kansas City.
  3. Ruediger Bachmann & Giuseppe Moscarini, 2011. "Business Cycles and Endogenous Uncertainty," 2011 Meeting Papers 36, Society for Economic Dynamics.
  4. Eisfeldt, Andrea L. & Rampini, Adriano A., 2006. "Capital reallocation and liquidity," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 369-399, April.
  5. Joseph Vavra, 2013. "Inflation Dynamics and Time-Varying Volatility: New Evidence and an Ss Interpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 215-258.
  6. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," 2011 Meeting Papers 484, Society for Economic Dynamics.
  7. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  8. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen J. Terry, 2012. "Really Uncertain Business Cycles," NBER Working Papers 18245, National Bureau of Economic Research, Inc.
  9. Ruediger Bachmann & Ricardo J. Caballero & Eduardo Engel, 2008. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," Cowles Foundation Discussion Papers 1566R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2010.
  10. Joseph Vavra & David Berger, 2012. "Consumption Dynamics During the Great Recession," 2012 Meeting Papers 109, Society for Economic Dynamics.
  11. RĂ¼diger Bachmann & Christian Bayer, 2011. "Uncertainty Business Cycles - Really?," NBER Working Papers 16862, National Bureau of Economic Research, Inc.
  12. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2013. "Price Setting with Customer Retention," EIEF Working Papers Series 1328, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2013.
  13. Gourio, Francois & Kashyap, Anil K, 2007. "Investment spikes: New facts and a general equilibrium exploration," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 1-22, September.
  14. Ariel Burstein & Gita Gopinath, 2013. "International Prices and Exchange Rates," NBER Working Papers 18829, National Bureau of Economic Research, Inc.
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Cited by:
  1. Joseph S. Vavra, 2014. "Time-Varying Phillips Curves," NBER Working Papers 19790, National Bureau of Economic Research, Inc.
  2. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2013. "Price Setting with Customer Retention," EIEF Working Papers Series 1328, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2013.

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