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Pass-Through of Imported Input Prices to Domestic Producer Prices: Evidence from Sector-Level Data

Author

Listed:
  • JaeBin Ahn

    () (Research Department, International Monetary Fund)

  • Chang-Gui Park

    () (Economic Research Team, Daejeon & Chungnam Branch, the Bank of Korea)

  • Chanho Park

    () (International Finance Division, International Department, the Bank of Korea)

Abstract

Motivated by stylized facts pointing to a dominant role of imported inputs in transmitting external price shocks to domestic prices, this paper zooms in to study the pass-through of imported input costs to domestic producer prices. Our approach constructs effective input price indices from sector-level price data combined with sector-level information on input-output linkages. Applying an error correction model specification to sector-level output and input prices, the long-run pass-through rate of effective imported input costs to domestic producer prices is estimated to be around 70 percent in Korea and almost 100 percent in selected European countries.

Suggested Citation

  • JaeBin Ahn & Chang-Gui Park & Chanho Park, 2016. "Pass-Through of Imported Input Prices to Domestic Producer Prices: Evidence from Sector-Level Data," Working Papers 2016-2, Economic Research Institute, Bank of Korea.
  • Handle: RePEc:bok:wpaper:1602
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    File URL: http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2016-2.pdf
    File Function: Working Paper, 2016
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    References listed on IDEAS

    as
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    2. Plamen K Iossifov & Jiri Podpiera, 2014. "Are Non-Euro Area EU Countries Importing Low Inflation from the Euro Area?," IMF Working Papers 14/191, International Monetary Fund.
    3. Corsetti, Giancarlo & Pesenti, Paolo, 2005. "International dimensions of optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 281-305, March.
    4. Ahn, JaeBin & Park, Chang-Gui, 2014. "Exchange rate pass-through to domestic producer prices: Evidence from Korean firm-level pricing survey," Economics Letters, Elsevier, vol. 125(1), pages 138-142.
    5. Auer, Raphael A. & Mehrotra, Aaron, 2014. "Trade linkages and the globalisation of inflation in Asia and the Pacific," Journal of International Money and Finance, Elsevier, vol. 49(PA), pages 129-151.
    6. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
    7. International Monetary Fund, 2015. "Cross-Country Report on Inflation; Selected Issues," IMF Staff Country Reports 15/184, International Monetary Fund.
    8. Burstein, Ariel & Gopinath, Gita, 2014. "International Prices and Exchange Rates," Handbook of International Economics, Elsevier.
    9. Jaewoo Lee, 1997. "The Response Of Exchange Rate Pass-Through To Market Concentration In A Small Economy: The Evidence From Korea," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 142-145, February.
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    Citations

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    Cited by:

    1. JaeBin Ahn & Moon Jung Choi, 2016. "From Firm-level Imports to Aggregate Productivity: Evidence from Korean Manufacturing Firms Data," Working Papers 2016-6, Economic Research Institute, Bank of Korea.
    2. Raphael A. Auer & Andrei A. Levchenko & Philip Sauré, 2019. "International Inflation Spillovers through Input Linkages," The Review of Economics and Statistics, MIT Press, vol. 101(3), pages 507-521, July.
    3. repec:nea:journl:y:2019:i:41:p:128-157 is not listed on IDEAS
    4. repec:imx:journl:v:13:y:2018:i:4:p:525-545 is not listed on IDEAS

    More about this item

    Keywords

    Exchange rate pass-through; Imported input cost pass-through; Inflation;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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