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Exchange-Rate Pass-through with Intertemporal Linkages: Evidence at the Commodity Level

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  • Parsley, David C

Abstract

This paper argues that the stability of exchange-rate pass-through is not well tested in common econometric specifications of pass-through equations. This is because (1) expected future exchange-rate changes are an important omitted variable in these estimations, and (2) the use of aggregate data complicates inference. Commodity-level estimates obtained from applying the Kalman filter are consistent with the apparent instability in aggregate pass-through. Moreover, by comparing these estimates to actual exchange-rate movements, the observed instability is found to be consistent with forward-looking behavior as posited. Copyright 1995 by Blackwell Publishing Ltd.

Suggested Citation

  • Parsley, David C, 1995. "Exchange-Rate Pass-through with Intertemporal Linkages: Evidence at the Commodity Level," Review of International Economics, Wiley Blackwell, vol. 3(3), pages 330-341, October.
    • Handle: RePEc:bla:reviec:v:3:y:1995:i:3:p:330-41
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    Cited by:

    1. David C. Parsley & Helen A. Popper, 1998. "Exchange Rates, Domestic Prices, and Central Bank Actions: Recent U.S. Experience," Southern Economic Journal, John Wiley & Sons, vol. 64(4), pages 957-972, April.
    2. Tovonony Razafindrabe, 2017. "Nonlinearity and asymmetry in the exchange rate pass-through: What role for nominal price stickiness?," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 711-732, September.
    3. Goodwin, Barry K. & Holt, Matthew T. & Prestemon, Jeffrey P., 2019. "Nonlinear exchange rate pass-through in timber products: The case of oriented strand board in Canada and the United States," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    4. Lee, Jaewoo, 1998. "Intertemporal substitution in imported durables," Journal of International Economics, Elsevier, vol. 44(1), pages 113-133, February.
    5. David C. Parsley, 2004. "Pricing in International Markets: a “Small‐country” Benchmark," Review of International Economics, Wiley Blackwell, vol. 12(3), pages 509-524, August.

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