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Discussion Paper Details

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Title: Exchange Rate Pass-Through into Import Prices

Author(s): Jos� Manuel Campa and Linda S. Goldberg

Publication Date: May 2004

Keyword(s): exchange rates, pass-through and trade composition

Programme Area(s): International Macroeconomics

Abstract: We provide cross-country and time series evidence on the extent of exchange rate pass-through into the import prices of 25 OECD countries. Across the OECD and especially within manufacturing industries, we find compelling evidence of partial pass-through in the short run, rejecting both producer-currency pricing and local currency pricing. Over the long run, producer-currency pricing is more prevalent for many types of imported goods. We show that many countries have experienced changes in exchange rate pass-through over the past decades. While we find that countries with higher rates of exchange rate volatility are also those with higher pass-through elasticities, we also conclude that macroeconomic variables have played only a minor role in accounting for the evolution of OECD pass-through over time. Far more important for pass-through changes have been the dramatic shifts in the composition of country import bundles.

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Bibliographic Reference

Campa, J and Goldberg, L. 2004. 'Exchange Rate Pass-Through into Import Prices'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4391