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Estimating pass-through: structure and stability

Author

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  • William R. Melick

Abstract

This paper estimates the pass-through relationship between exchange rates and import prices for the United States using recursive techniques across a variety of specifications to examine structural and coefficient stability in a systematic fashion. Results of estimations: 1) indicate that pass-through at the macroeconomic level is a complicated amalgamation of disparate industrial structures that involves more than one long-run equilibrium relationship between the variables of interest, and 2) call into question the prevailing wisdom that foreign firms changed their pricing behavior in light of the large appreciation in the exchange value of the dollar in the early 1980s.

Suggested Citation

  • William R. Melick, 1990. "Estimating pass-through: structure and stability," International Finance Discussion Papers 387, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:387
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    File URL: http://www.federalreserve.gov/pubs/ifdp/1990/387/default.htm
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    Citations

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    Cited by:

    1. Geoff Kenny & Donal Mcgettigan, 1998. "Exchange rates and import prices for a small open economy: the case of Ireland," Applied Economics, Taylor & Francis Journals, vol. 30(9), pages 1147-1155.
    2. Atish Ghosh & Holger Wolf, 2001. "Imperfect Exchange Rate Passthrough: Strategic Pricing and Menu Costs," CESifo Working Paper Series 436, CESifo Group Munich.
    3. Ramon Moreno, 1991. "Explaining the U.S. export boom," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 39-52.
    4. Menzie David Chinn, 1991. "Beware of econometricians bearing estimates: Policy analysis in a “unit root” world," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 10(4), pages 546-567.
    5. Sabiston, David R., 2001. "Le pass-through du taux de change," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(3), pages 425-454, septembre.

    More about this item

    Keywords

    Interest rates ; Foreign exchange rates;

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