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Pass-through Across Products and Time

  • Joseph Vavra

    (University of Chicago)

  • David Berger

    (Northwestern University)

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
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Handle: RePEc:red:sed013:452
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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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  1. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen J. Terry, 2014. "Really Uncertain Business Cycles," Working Papers 14-18, Center for Economic Studies, U.S. Census Bureau.
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  6. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," 2011 Meeting Papers 484, Society for Economic Dynamics.
  7. Peter J. Klenow & Jonathan L. Willis, 2006. "Real rigidities and nominal price changes," Research Working Paper RWP 06-03, Federal Reserve Bank of Kansas City.
  8. Eisfeldt, Andrea L. & Rampini, Adriano A., 2006. "Capital reallocation and liquidity," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 369-399, April.
  9. David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings 327, Econometric Society.
  10. David Berger & Joseph Vavra, 2015. "Consumption Dynamics During Recessions," Econometrica, Econometric Society, vol. 83, pages 101-154, 01.
  11. 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.
  12. Ruediger Bachmann & Ricardo J. Caballero & Eduardo Engel, 2008. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," Cowles Foundation Discussion Papers 1566R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2010.
  13. Ariel Burstein & Gita Gopinath, 2013. "International Prices and Exchange Rates," NBER Working Papers 18829, National Bureau of Economic Research, Inc.
  14. Alberto Cavallo, 2015. "Scraped Data and Sticky Prices," NBER Working Papers 21490, National Bureau of Economic Research, Inc.
  15. Joseph S. Vavra, 2013. "Inflation Dynamics and Time-Varying Volatility: New Evidence and an Ss Interpretation," NBER Working Papers 19148, National Bureau of Economic Research, Inc.
  16. repec:oup:qjecon:v:129:y:2013:i:1:p:215-258 is not listed on IDEAS
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