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Pass-through Across Products and Time

Author

Listed:
  • 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.

Suggested Citation

  • Joseph Vavra & David Berger, 2013. "Pass-through Across Products and Time," 2013 Meeting Papers 452, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:452
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    References listed on IDEAS

    as
    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.
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    4. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta†Eksten & Stephen J. Terry, 2018. "Really Uncertain Business Cycles," Econometrica, Econometric Society, vol. 86(3), pages 1031-1065, May.
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    11. 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.
    12. Rüdiger Bachmann & Christian Bayer, 2011. "Uncertainty Business Cycles - Really?," NBER Working Papers 16862, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2019. "Price Dynamics With Customer Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(1), pages 413-446, February.
    2. 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.
    3. Forbes, Kristin & Hjortsoe, Ida & Nenova, Tsvetelina, 2018. "The shocks matter: Improving our estimates of exchange rate pass-through," Journal of International Economics, Elsevier, vol. 114(C), pages 255-275.
    4. Berger, David & Vavra, Joseph, 2018. "Dynamics of the U.S. price distribution," European Economic Review, Elsevier, vol. 103(C), pages 60-82.
    5. Chan, Ying Tung, 2020. "Carbon policies and productivity uncertainty: An intertemporal analysis," Technological Forecasting and Social Change, Elsevier, vol. 158(C).
    6. Joseph S. Vavra, 2014. "Time-Varying Phillips Curves," NBER Working Papers 19790, National Bureau of Economic Research, Inc.

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    More about this item

    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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