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Exchange Rate Pass-Through in the Global Economy

Author

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  • Bussière, M.
  • Delle Chiaie, S.
  • Peltonen, T. A.

Abstract

This paper estimates export and import price equations for 40 countries – including 19 emerging market economies (EMEs) – and aims to understand heterogeneity across countries in the degree of exchange rate pass-through to import and to export prices. Results indicate that (i) the elasticities of trade prices are sizeable in EMEs, and higher on average than in advanced economies for export prices; (ii) such elasticities are primarily influenced by macroeconomic factors; (iii) export and import price elasticities tend to be strongly correlated across countries; (iv) lower exchange rate pass-through in the United States, compared to other advanced economies, can be related to the geographical distribution of U.S. imports, more heavily concentrated in countries with high elasticity of export prices. Overall, these results yield an enhanced understanding of exchange rate pass-through, emphasizing the role of external factors.

Suggested Citation

  • Bussière, M. & Delle Chiaie, S. & Peltonen, T. A., 2013. "Exchange Rate Pass-Through in the Global Economy," Working papers 424, Banque de France.
  • Handle: RePEc:bfr:banfra:424
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    References listed on IDEAS

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    1. Should we really worry about currency wars?
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2014-12-08 19:42:00

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    Cited by:

    1. Raphael A. Auer, 2015. "Exchange Rate Pass‐Through, Domestic Competition, and Inflation: Evidence from the 2005–08 Revaluation of the Renminbi," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(8), pages 1617-1650, December.
    2. Cozmanca, Bogdan-Octavian & Manea, Florentina, 2010. "Exchange Rate Pass-Through into Romanian Price Indices. Avar Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 26-52, September.
    3. Stephane Dees & Matthias Burgert & Nicolas Parent, 2013. "Import price dynamics in major advanced economies and heterogeneity in exchange rate pass-through," Empirical Economics, Springer, vol. 45(2), pages 789-816, October.
    4. Joscha Beckmann & Ansgar Belke & Florian Verheyen, 2013. "Exchange Rate Pass-through into German Import Prices – A Disaggregated Perspective," Ruhr Economic Papers 0427, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    5. Pierre-Richard Agénor & K. Alper & L. Pereira da Silva, 2015. "External Shocks, Financial Volatility and Reserve Requirements in an Open Economy," Working Papers Series 396, Central Bank of Brazil, Research Department.
    6. Fischer, Stanley, 2015. "The Transmission of Exchange Rate Changes to Output and Inflation : a speech at the "Monetary Policy Implementation and Transmission in the Post-Crisis Period," a research conference sponsor," Speech 877, Board of Governors of the Federal Reserve System (U.S.).
    7. Agénor, Pierre-Richard & Alper, Koray & Pereira da Silva, Luiz A., 2014. "Sudden floods, macroprudential regulation and stability in an open economy," Journal of International Money and Finance, Elsevier, vol. 48(PA), pages 68-100.
    8. Siok Kun, Sek, 2009. "The impacts of economic structures on the performance of simple policy rules in a small open economy," MPRA Paper 25065, University Library of Munich, Germany.
    9. Beatriz de Blas & Katheryn N. Russ, 2015. "Understanding Markups in the Open Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 157-180, April.
    10. Choudhri, Ehsan U. & Hakura, Dalia S., 2015. "The exchange rate pass-through to import and export prices: The role of nominal rigidities and currency choice," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 1-25.
    11. Jimborean, Ramona, 2013. "The exchange rate pass-through in the new EU member states," Economic Systems, Elsevier, vol. 37(2), pages 302-329.
    12. Mirdala, Rajmund, 2013. "Exchange Rate Pass-Through to Domestic Prices under Different Exchange Rate Regimes," MPRA Paper 53209, University Library of Munich, Germany.
    13. Joscha Beckmann & Ansgar Belke & Florian Verheyen, 2014. "Exchange rate pass-through into German import prices - a disaggregated perspective," Applied Economics, Taylor & Francis Journals, vol. 46(34), pages 4164-4177, December.
    14. Stefan Schiman & Andreas Reinstaller, 2015. "Analyse der Terms-of-Trade Österreichs," FIW Research Reports series VI-004, FIW.
    15. International Monetary Fund, 2015. "Republic of Belarus; Selected Issues," IMF Staff Country Reports 15/137, International Monetary Fund.
    16. Kiliç, Rehim, 2016. "Regime-dependent exchange-rate pass-through to import prices," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 295-308.
    17. Paul Welfens, 2012. "Marshall-Lerner condition and economic globalization," International Economics and Economic Policy, Springer, vol. 9(2), pages 191-207, June.
    18. Mutuc, Maria Erlinda M. & Pan, Suwen & Hudson, Darren, 2011. "Sino-U.S. Price Transmission in Agricultural Commodities: How Important are Exchange Rate Movements?," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103459, Agricultural and Applied Economics Association.
    19. repec:zbw:rwirep:0427 is not listed on IDEAS
    20. David Hargreaves & Elizabeth Watson, 2011. "Sudden stops, external debt and the exchange rate," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 74, pages 1-11, December.

    More about this item

    Keywords

    emerging market economies; exchange rate pass-through; terms of trade.;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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