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Pass-through Across Products and Time

Author Info

Listed author(s):
  • Joseph Vavra

    (University of Chicago)

  • David Berger

    (Northwestern University)

Abstract

How do import prices respond to exchange rate changes, and does this response vary across products or across time? We document two new and related facts: 1. Individual items with high price change variance have greater exchange rate pass-through. 2. During times when the cross-sectional variance of price changes is high, there is greater exchange rate pass-through. We show that these results are not driven by differences in the frequency of adjustment across products or time. We explore the extent to which these facts can be explained by time-varying product level volatility and their implications for aggregate inflation and monetary policy. Existing work has documented that trade prices declined only modestly in 2008 at the same time that trade volumes collapsed. Our evidence makes this fact even more puzzling, since pass-through is unusually high during this same period.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 452.

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Date of creation: 2013
Handle: RePEc:red:sed013:452
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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Find related papers by JEL classification:
  • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
  • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • F31 - International Economics - - International Finance - - - Foreign Exchange

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  1. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
  2. repec:hrv:faseco:30703874 is not listed on IDEAS
  3. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2013. "Price Dynamics with Customer Markets," EIEF Working Papers Series 1328, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2015.
  4. Gourio, Francois & Kashyap, Anil K, 2007. "Investment spikes: New facts and a general equilibrium exploration," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 1-22, September.
  5. Alberto Cavallo, 2015. "Scraped Data and Sticky Prices," NBER Working Papers 21490, National Bureau of Economic Research, Inc.
  6. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen J. Terry, 2012. "Really Uncertain Business Cycles," NBER Working Papers 18245, National Bureau of Economic Research, Inc.
  7. Aubhik Khan & Julia K. Thomas, 2008. "Idiosyncratic Shocks and the Role of Nonconvexities in Plant and Aggregate Investment Dynamics," Econometrica, Econometric Society, vol. 76(2), pages 395-436, 03.
  8. Ariel Burstein & Gita Gopinath, 2013. "International Prices and Exchange Rates," NBER Working Papers 18829, National Bureau of Economic Research, Inc.
  9. Peter J. Klenow & Jonathan L. Willis, 2016. "Real Rigidities and Nominal Price Changes," Economica, London School of Economics and Political Science, vol. 83(331), pages 443-472, 07.
  10. Joseph Vavra, 2014. "Inflation Dynamics and Time-Varying Volatility: New Evidence and an Ss Interpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 215-258.
  11. Rüdiger Bachmann & Christian Bayer, 2011. "Uncertainty Business Cycles - Really?," NBER Working Papers 16862, National Bureau of Economic Research, Inc.
  12. repec:oup:qjecon:v:129:y:2013:i:1:p:215-258 is not listed on IDEAS
  13. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," 2011 Meeting Papers 484, Society for Economic Dynamics.
  14. R?diger Bachmann & Ricardo J. Caballero & Eduardo M. R. A. Engel, 2013. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 29-67, October.
  15. David Berger & Joseph Vavra, 2015. "Consumption Dynamics During Recessions," Econometrica, Econometric Society, vol. 83, pages 101-154, 01.
  16. repec:hrv:faseco:32116841 is not listed on IDEAS
  17. Neiman, Brent, 2010. "Stickiness, synchronization, and passthrough in intrafirm trade prices," Journal of Monetary Economics, Elsevier, vol. 57(3), pages 295-308, April.
  18. Eisfeldt, Andrea L. & Rampini, Adriano A., 2006. "Capital reallocation and liquidity," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 369-399, April.
  19. repec:hrv:faseco:30703806 is not listed on IDEAS
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Cited by:

  1. Auer, Raphael A. & Schoenle, Raphael S., 2016. "Market structure and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 98(C), pages 60-77.
  2. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2013. "Price Dynamics with Customer Markets," EIEF Working Papers Series 1328, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2015.
  3. David Berger & Joseph Vavra, 2015. "Dynamics of the U.S. Price Distribution," NBER Working Papers 21732, National Bureau of Economic Research, Inc.
  4. Joseph S. Vavra, 2014. "Time-Varying Phillips Curves," NBER Working Papers 19790, National Bureau of Economic Research, Inc.

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