Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices

This paper shows that in theory and BLS microdata, the prices of imported goods respond to the exchange rates (ER) of the producer's foreign competitors. In contrast, standard models have no role for competitors' ERs. Excluding the effect...

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Main Author:	Pennings, Steven
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2017
Subjects:	import prices exchange rates industry aggregation model
Online Access:	http://documents.worldbank.org/curated/en/515151482175641851/Pass-through-of-competitors-exchange-rates-to-us-import-and-producer-prices http://hdl.handle.net/10986/25829

id	okr-10986-25829
recordtype	oai_dc
spelling	okr-10986-258292021-06-08T14:42:46Z Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices Pennings, Steven import prices exchange rates industry aggregation model This paper shows that in theory and BLS microdata, the prices of imported goods respond to the exchange rates (ER) of the producer's foreign competitors. In contrast, standard models have no role for competitors' ERs. Excluding the effects of competitors' exchange rates typically biases upwards estimates of bilateral exchange rate pass-through because competitors' ERs and bilateral ERs are positively correlated. A multi-country version of Atkeson and Burstein's (2008) industry aggregation model is able to explain a sizable proportion of pass-through of competitors' exchange rates to import prices, and also predicts pass-through of foreign competitors' prices and pass-through of competitors' ERs to US producer prices -- both of which are supported in the data. The results suggest that pass-through will be larger for ER movements shared by a greater fraction of foreign competitor countries. 2017-01-10T17:49:31Z 2017-01-10T17:49:31Z 2016-12 Working Paper http://documents.worldbank.org/curated/en/515151482175641851/Pass-through-of-competitors-exchange-rates-to-us-import-and-producer-prices http://hdl.handle.net/10986/25829 English en_US Policy Research Working Paper;No. 7926 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	import prices exchange rates industry aggregation model
spellingShingle	import prices exchange rates industry aggregation model Pennings, Steven Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices
relation	Policy Research Working Paper;No. 7926
description	This paper shows that in theory and BLS microdata, the prices of imported goods respond to the exchange rates (ER) of the producer's foreign competitors. In contrast, standard models have no role for competitors' ERs. Excluding the effects of competitors' exchange rates typically biases upwards estimates of bilateral exchange rate pass-through because competitors' ERs and bilateral ERs are positively correlated. A multi-country version of Atkeson and Burstein's (2008) industry aggregation model is able to explain a sizable proportion of pass-through of competitors' exchange rates to import prices, and also predicts pass-through of foreign competitors' prices and pass-through of competitors' ERs to US producer prices -- both of which are supported in the data. The results suggest that pass-through will be larger for ER movements shared by a greater fraction of foreign competitor countries.
format	Working Paper
author	Pennings, Steven
author_facet	Pennings, Steven
author_sort	Pennings, Steven
title	Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices
title_short	Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices
title_full	Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices
title_fullStr	Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices
title_full_unstemmed	Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices
title_sort	pass-through of competitors' exchange rates to u.s. import and producer prices
publisher	World Bank, Washington, DC
publishDate	2017
url	http://documents.worldbank.org/curated/en/515151482175641851/Pass-through-of-competitors-exchange-rates-to-us-import-and-producer-prices http://hdl.handle.net/10986/25829
_version_	1764460254679007232

Pass-through of Competitors' Exchange Rates to U.S. Import and Producer Prices

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