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Data frequency and exchange rate pass-through: Evidence from India's exports

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  • Mallick, Sushanta
  • Marques, Helena

Abstract

This paper studies the pricing behavior of Indian exporters using both annual and monthly data in order to uncover the role of data frequency in determining variation in the degree of short and long-run exchange rate pass-through (ERPT). Export price data during the post-1991 economic reforms period is disaggregated at the two-digit industry level and using a novel methodology in the ERPT literature (cointegration for heterogeneous panels) cross-industry differences in adjustment are identified. We observe that there is clear evidence of incomplete ERPT to prices in India's export markets, after having controlled for the level of exchange rate volatility and domestic inflation as an indicator of variations in marginal cost. The empirical results indicate that monthly data reflect more incomplete ERPT to destination market prices, relative to annual data, in which all the short run rigidities are more likely to have been adjusted. Thus studies that use higher frequency data are more likely to find incomplete ERPT in the short-run, even in the context of an emerging market economy. In the long-run, incomplete ERPT subsists in a few industries for both data frequencies.

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  • Mallick, Sushanta & Marques, Helena, 2010. "Data frequency and exchange rate pass-through: Evidence from India's exports," International Review of Economics & Finance, Elsevier, vol. 19(1), pages 13-22, January.
  • Handle: RePEc:eee:reveco:v:19:y:2010:i:1:p:13-22
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    Cited by:

    1. Yanamandra, Venkataramana, 2015. "Exchange rate changes and inflation in India: What is the extent of exchange rate pass-through to imports?," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 57-68.
    2. Beladi, Hamid & Chakrabarti, Avik & Marjit, Sugata, 2010. "Exchange rate pass-through: A generalization," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 493-504, July.
    3. repec:eee:iburev:v:26:y:2017:i:6:p:1034-1050 is not listed on IDEAS
    4. Peltonen, Tuomas A. & Sousa, Ricardo M. & Vansteenkiste, Isabel S., 2012. "Wealth effects in emerging market economies," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 155-166.
    5. Mallick, Sushanta & Marques, Helena, 2016. "Pricing strategy of emerging market exporters in alternate currency regimes: The role of comparative advantage," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 68-81.
    6. Alan ASPRILLA & Nicolas BERMAN & Olivier CADOT & Melise JAUD, 2016. "Trade Policy and Market Power: Firm-level Evidence," Working Papers P161, FERDI.
    7. Alan ASPRILLA & Nicolas BERMAN & Olivier CADOT & Melise JAUD, 2016. "Trade Policy and Market Power: Firm-level Evidence," Working Papers P161, FERDI.
    8. Nicolas Berman & Alan Asprilla & Olivier Cadot & Mélise Jaud, 2015. "Pricing-to-market, Trade Policy, and Market Power," IHEID Working Papers 04-2015, Economics Section, The Graduate Institute of International Studies.
    9. Nazli Toraganli, 2010. "Exchange Rate Pass-Through and Exposure in the Turkish Economy," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 10(1), pages 47-69.

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