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Exchange Rate Pass-Through into Import Prices: The Case of Chile

  • Roberto Álvarez
  • Patricio Jaramillo
  • Jorge Selaive

In this paper we estimate the exchange rate pass-through (ERPT) into disaggregated import price data at monthly frequency. We work with import prices both at the border and at the wholesale level, and our results are consistent with the idea of a high ERPT— complete in the long-run—which has not declined for both pricing levels. In the shortrun, however, wholesale prices seem to be less sensitive to exchange rate variations. This may indicate the existence of a pass-through less than perfect in the distribution chain from prices at the border to its wholesale counterpart. In addition, we find weak evidence of asymmetric pass-through from appreciations versus depreciations for the aggregate import indexes. Finally, we also explore if the high and not declining ERPT is given by the fact that Chilean imports are concentrated in products with such ERPT, and our results support the view that this is not the case.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 465.

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Date of creation: Apr 2008
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Handle: RePEc:chb:bcchwp:465
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  1. Philippe Bacchetta & Eric van Wincoop, 2002. "Why Do Consumer Prices React less than Import Prices to Exchange Rates?," NBER Working Papers 9352, National Bureau of Economic Research, Inc.
  2. Hafedh Bouakez & Nooman Rebei, 2005. "Has Exchange Rate Pass-Through Really Declined in Canada?," Working Papers 05-29, Bank of Canada.
  3. Carlos Noton, 2003. "The Pass-through from Depreciation to Inflation: Chile 1986-2001," Working Papers wp202, University of Chile, Department of Economics.
  4. Salvador Gil-Pareja, 2000. "Exchange rates and European countries’ export prices: An empirical test for asymmetries in pricing to market behavior," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(1), pages 1-23, March.
  5. Rodrigo Caputo G. & Bernardo Dominichetti H., 2005. "Revisión Metodológica en el Cálculo del IPE e Implicancias sobre los Modelos de Serie de Tiempo Para el TCR," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 8(1), pages 77-82, April.
  6. Jeffrey Frankel & David Parsley & Shang-Jin Wei, 2012. "Slow Pass-through Around the World: A New Import for Developing Countries?," Open Economies Review, Springer, vol. 23(2), pages 213-251, April.
  7. Campa, Jose M. & Goldberg, Linda S. & Gonzalez-Minguez, Jose M., 2005. "Exchange-rate pass-through to import prices in the euro area," IESE Research Papers D/609, IESE Business School.
  8. Miguel Fuentes, 2007. "Pass-Through to Import Prices: Evidence from Developing Countries," Documentos de Trabajo 320, Instituto de Economia. Pontificia Universidad Católica de Chile..
  9. Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
  10. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
  11. Otani, Akira & Shiratsuka, Shigenori & Shirota, Toyoichiro, 2003. "The Decline in the Exchange Rate Pass-Through: Evidence from Japanese Import Prices," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(3), pages 53-81, October.
  12. Frederic S. Miskin & Klaus Schmidt-Hebbel, 2007. "Monetary Policy under Inflation Targeting: An Introduction," Central Banking, Analysis, and Economic Policies Book Series, in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 1, pages 001-022 Central Bank of Chile.
  13. Haroon Mumtaz & Özlem Oomen & Jian Wang, 2006. "Exchange rate pass-through into UK import prices," Bank of England working papers 312, Bank of England.
  14. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
  15. Toshitaka Sekine, 2006. "Time-varying exchange rate pass-through: experiences of some industrial countries," BIS Working Papers 202, Bank for International Settlements.
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