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Exchange rate pass-through: New evidence from German micro data

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  • Berner, Eike

Abstract

This paper examines exchange rate pass-through into German import unit values over the last 20 years. I find incomplete pass-through to be the predominant characteristic for German imports with an average rate of 42% over three months. This result holds when considering monthly 8-digit data, the most disaggregated German import data available. Furthermore, I distinguish 16 German trading partners and estimate substantial cross-country differences in the pass-through to import unit values. Imports coming from European countries generally exhibit statistically zero pass-through. By contrast, non-European trading partners are characterized by statistically significant incomplete pass-through rates. I also study whether there are differences in the pass-through rates for appreciations and depreciations, as well as for small and large exchange rate shocks. Moreover, I test for a negative correlation between the goods' quality and its pass-through rate. --

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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2011,01.

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Date of creation: 2011
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Handle: RePEc:zbw:cauewp:201101

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Keywords: exchange rate; pass-through; import prices; Germany;

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  1. Jonathan McCarthy, 2007. "Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 511-537, Fall.
  2. Gita Gopinath & Oleg Itskhoki & Roberto Rigobon, 2007. "Currency Choice and Exchange Rate Pass-through," NBER Working Papers 13432, National Bureau of Economic Research, Inc.
  3. Robert Feenstra, 2003. "Integration Of Trade And Disintegration Of Production In The Global Economy," Working Papers, University of California, Davis, Department of Economics 986, University of California, Davis, Department of Economics.
  4. Gita Gopinath & Oleg Itskhoki, 2010. "Frequency of Price Adjustment and Pass-Through," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 125(2), pages 675-727, May.
  5. Raphael Auer & Thomas Chaney, 2009. "Exchange rate pass-through in a competitive model of pricing-to-market," Globalization and Monetary Policy Institute Working Paper, Federal Reserve Bank of Dallas 23, Federal Reserve Bank of Dallas.
  6. Ghosh, Amit & Rajan, Ramkishen S., 2009. "Exchange rate pass-through in Korea and Thailand: Trends and determinants," Japan and the World Economy, Elsevier, Elsevier, vol. 21(1), pages 55-70, January.
  7. Christopher Gust & Sylvain Leduc & Robert Vigfusson, 2006. "Trade Integration, Competiton, and the Decline in Exchange-rate Pass-through," 2006 Meeting Papers, Society for Economic Dynamics 165, Society for Economic Dynamics.
  8. Guillaume Gaulier & Amina Lahrèche-Révil & Isabelle Méjean, 2008. "Exchange-rate pass-through at the product level," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 41(2), pages 425-449, May.
  9. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports, Federal Reserve Bank of New York 72, Federal Reserve Bank of New York.
  10. Feinberg, Robert M, 2000. "The Role of International Discipline in Three Developing Economies: Exchange Rate Effects on Domestic Prices in Colombia, Korea, and Morocco," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 126-33, February.
  11. Charles Engel, 2009. "Pass-Through, Exchange Rates, and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(s1), pages 177-185, 02.
  12. Haroon Mumtaz & Özlem Oomen & Jian Wang, 2006. "Exchange rate pass-through into UK import prices," Bank of England working papers 312, Bank of England.
  13. Jeevan K Khundrakpam, 2007. "Economic reforms and exchange rate pass-through to domestic prices in India," BIS Working Papers 225, Bank for International Settlements.
  14. Paul R. Bergin & Robert C. Feenstra, 2009. "Pass-Through of Exchange Rates and Competition between Floaters and Fixers," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 41(s1), pages 35-70, 02.
  15. Giovanni P. Olivei, 2002. "Exchange rates and the prices of manufacturing products imported into the United States," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Q 1, pages 3 - 18.
  16. Linda S. Goldberg & José Manuel Campa, 2010. "The Sensitivity of the CPI to Exchange Rates: Distribution Margins, Imported Inputs, and Trade Exposure," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 392-407, May.
  17. Mario Marazzi & Nathan Sheets & Robert J. Vigfusson & Jon Faust & Joseph Gagnon & Jaime Marquez & Robert F. Martin & Trevor Reeve & John Rogers, 2005. "Exchange rate pass-through to U.S. import prices: some new evidence," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 833, Board of Governors of the Federal Reserve System (U.S.).
  18. Hellerstein, Rebecca, 2008. "Who bears the cost of a change in the exchange rate? Pass-through accounting for the case of beer," Journal of International Economics, Elsevier, Elsevier, vol. 76(1), pages 14-32, September.
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Cited by:
  1. Fabio Rumler, 2012. "The Pass-Through of Commodity Prices to Consumer Prices of Selected Products," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 92–104.
  2. Joscha Beckmann & Ansgar Belke & Florian Verheyen, 2013. "Exchange Rate Pass-through into German Import Prices – A Disaggregated Perspective," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0427, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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