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The Impact Of A Large Depreciation On The Cost Of Living Of Rich And Poor Consumers

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  • Anatoli Colicev
  • Joris Hoste
  • Jozef Konings

Abstract

Using retailer scanner data, we investigate how a sharp and abrupt depreciation of the exchange rate affects consumers' cost of living. We find that the marginal cost of imported goods increased, whereas their retail markups decreased compared to domestic products. There was also a surge in the entry and exit of both foreign and local product varieties post‐depreciation. Wealthier consumers, who spend more on imports, are hit harder by higher marginal costs but benefit from reduced markups and increased product diversity, unlike their less affluent counterparts.

Suggested Citation

  • Anatoli Colicev & Joris Hoste & Jozef Konings, 2024. "The Impact Of A Large Depreciation On The Cost Of Living Of Rich And Poor Consumers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(4), pages 1625-1656, November.
    • Handle: RePEc:wly:iecrev:v:65:y:2024:i:4:p:1625-1656
    DOI: 10.1111/iere.12720
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