Exchange Rate Pass-Through to Swedish Import Prices
Swedish import price determination is investigated using disaggregated monthly data from 1980:1 to 1995:05 for eight different industries. The cointegration analysis indicates two cointegrating relations, in all industries, between import prices, the exchange rate, world market prices and domestic prices. Two- equations systems involve an unclear definition of long-run exchange rate pass-through. Pass-through is defined as the total effect a nominal exchange-rate change has on the import price. The estimate thus includes the direct effect on import prices as well as the effect working through home market prices. Total pass-through estimates indicate a limited pass-through and thus pricing to market behaviour in the majority of industries. The estimates range from 27% to 160%. Tests of linear restrictions on the cointegrating vectors indicate a complete long-run pass-through in most industries. Short-run pass-through is limited to about 25%.
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|Date of creation:||Sep 1996|
|Date of revision:|
|Publication status:||Published in Finnish Economic Papers, 1997, pages 81-98.|
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- Peter Hooper & Catherine L. Mann, 1989. "Exchange Rate Pass-through in the 1980s: The Case of U.S. Imports of Manufactures," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 297-337.
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- Jayant Menon, 1992. "Exchange rates and prices of Australian manufactured exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(4), pages 695-710, December.
- Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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