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Monthly pass-through ratios

Listed author(s):
  • Amstad, Marlene
  • Fischer, Andreas M.

This paper estimates monthly pass-through ratios from import prices to consumer prices in real time. Conventional time series methods impose restrictions to generate exogenous shocks on exchange rates or import prices when estimating pass-through coefficients. Instead, a natural experiment based on data releases defines our shock to foreign prices. Our estimation strategy follows an event-study approach based on monthly releases in import prices. Projections from a dynamic common factor model with daily panels before and after monthly releases of import prices define the shock. This information shock allows us to recover a monthly pass-through ratio. We apply our identification procedure to Swiss prices and find strong evidence that the monthly pass-through ratio is around 0.3. Our real-time estimates yield higher pass-through ratios than time series estimates.

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File URL: http://dallasfed.org/assets/documents/institute/wpapers/2009/0026.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 26.

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Length: 37 pages
Date of creation: 2009
Handle: RePEc:fip:feddgw:26
Note: Published as: Amstad, Marlene and Andreas M. Fischer (2010), "Monthly Pass-Through Ratios," Journal of Economic Dynamics and Control 34 (7): 1202-1213.
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