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Sticky Borders

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  • Gita Gopinath
  • Roberto Rigobon

Abstract

The stickiness and currency of pricing of traded goods play a central role in international macroeconomics, however empirical evidence on these features is seriously limited. To address this we use microdata on U.S. import and export prices at-the-dock for the period 1994-2005, and present four main results: First, the median price duration in the currency of pricing is 10.6 (12.8) months for imports (exports). Second, 90% (97%) of imports (exports) are priced in dollars. Consequently, contrary to standard modeling assumptions, for the U.S, there is producer currency pricing in exports and local currency pricing in imports. Third, import price rigidity has increased by 10 percentage points, with increasing rigidity in differentiated goods prices. Fourth, even conditioning on a price change, exchange rate pass-through into U.S. import prices is low, at 22%.

Suggested Citation

  • Gita Gopinath & Roberto Rigobon, 2006. "Sticky Borders," NBER Working Papers 12095, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12095 Note: IFM ITI
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    References listed on IDEAS

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    Cited by:

    1. Kozluk, Tomasz & Banerjee, Anindya & de Bandt, Olivier, 2008. "Measuring Long-Run Exchange Rate Pass-Through," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-36.
    2. Volker Nitsch, 2009. "Die another day: duration in German import trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 133-154, April.
    3. Gust, Christopher & Leduc, Sylvain & Sheets, Nathan, 2009. "The adjustment of global external balances: Does partial exchange-rate pass-through to trade prices matter?," Journal of International Economics, Elsevier, vol. 79(2), pages 173-185, November.
    4. Andrea Nobili & Stefano Neri, 2006. "The transmission of monetary policy shocks from the US to the euro area," Temi di discussione (Economic working papers) 606, Bank of Italy, Economic Research and International Relations Area.
    5. María-Dolores, Ramon, 2009. "How different is the exchange rate pass-through in new member states of the EU? Some potential explanatory factors," UMUFAE Economics Working Papers 4698, DIGITUM. Universidad de Murcia.
    6. Frederic S. Mishkin, 2008. "Exchange Rate Pass-Through And Monetary Policy," NBER Working Papers 13889, National Bureau of Economic Research, Inc.
    7. Rose, Andrew K, 2006. "A Stable International Monetary System Emerges: Bretton Woods, Reversed," CEPR Discussion Papers 5854, C.E.P.R. Discussion Papers.
    8. Alon Binyamini & Assaf Razin, 2008. "Inflation-Output Tradeoff as Equilibrium Outcome of Globalization," NBER Working Papers 14379, National Bureau of Economic Research, Inc.
    9. Rose, Andrew K., 2007. "A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 663-681, September.

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General

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