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Production sharing and exchange rate pass-through

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  • Kim, Kyungmin

Abstract

This paper proposes a theoretical background for various possibilities of exchange pass-through and expenditure-switching by introducing an intermediate input sector into Rodriguez-Lopez (2011) model. I show that the degrees of exchange rate pass-through and expenditure switching depend on the shares of imported inputs in total costs. When the imported input shares are located within some range, a low but positive rate of pass-through to aggregate import prices can be derived in the model. In addition, both the size and the direction of expenditure-switching effects vary according to the imported input shares.

Suggested Citation

  • Kim, Kyungmin, 2021. "Production sharing and exchange rate pass-through," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 817-835.
    • Handle: RePEc:eee:reveco:v:76:y:2021:i:c:p:817-835
    DOI: 10.1016/j.iref.2021.07.017
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    References listed on IDEAS

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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