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Importer Dispersion and Exchange Rate Pass-Through

Author

Listed:
  • Qingyuan Du

    (Department of Economics, Monash University)

  • Yalin Liu

    (Central University of Finance and Economics)

  • Jianwei Xu

    (Beijing Normal University)

Abstract

This paper investigates the effect of importer dispersion on exchange rate pass-through. We show theoretically that greater importer dispersion leads to lower exporter markup, thereby causing a higher exchange rate pass-through. Empirically, we use Colombia’s transaction-level customs data to provide strong evidence supporting the theoretical prediction. The quantitative effect of importer dispersion on exchange rate pass-through is significant: the importer dispersion channel is at least as important as the traditional exporter heterogeneity channel. Our results are robust to various empirical specifications and become even stronger in the context of the dominant currency paradigm.

Suggested Citation

  • Qingyuan Du & Yalin Liu & Jianwei Xu, 2022. "Importer Dispersion and Exchange Rate Pass-Through," Monash Economics Working Papers 2022-23, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2022-23
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    References listed on IDEAS

    as
    1. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2014. "Importers, Exporters, and Exchange Rate Disconnect," American Economic Review, American Economic Association, vol. 104(7), pages 1942-1978, July.
    2. Gita Gopinath & Emine Boz & Camila Casas & Federico J. Díez & Pierre-Olivier Gourinchas & Mikkel Plagborg-Møller, 2020. "Dominant Currency Paradigm," American Economic Review, American Economic Association, vol. 110(3), pages 677-719, March.
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    5. Burstein, Ariel T. & Neves, Joao C. & Rebelo, Sergio, 2003. "Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1189-1214, September.
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    Full references (including those not matched with items on IDEAS)

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    • F1 - International Economics - - Trade

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