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 effects of competitors' exchange rates typically bias...

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Bibliographic Details
Main Author:	Pennings, Steven
Format:	Journal Article
Published:	Elsevier 2018
Subjects:	EXCHANGE RATES IMPORT PRICES PRODUCER PRICES
Online Access:	http://hdl.handle.net/10986/29188

id	okr-10986-29188
recordtype	oai_dc
spelling	okr-10986-291882021-05-25T10:54:43Z Pass-Through of Competitors' Exchange Rates to U.S. Import and Producer Prices Pennings, Steven EXCHANGE RATES IMPORT PRICES 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 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. 2018-01-18T22:01:18Z 2018-01-18T22:01:18Z 2017-03 Journal Article Journal of International Economics 0022-1996 http://hdl.handle.net/10986/29188 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Elsevier Publications & Research :: Journal Article Publications & Research Europe European Union Canada Japan United States
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	EXCHANGE RATES IMPORT PRICES PRODUCER PRICES
spellingShingle	EXCHANGE RATES IMPORT PRICES PRODUCER PRICES Pennings, Steven Pass-Through of Competitors' Exchange Rates to U.S. Import and Producer Prices
geographic_facet	Europe European Union Canada Japan United States
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	Journal Article
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	Elsevier
publishDate	2018
url	http://hdl.handle.net/10986/29188
_version_	1764468725023506432

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

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