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International Financial Issues in the Pacific RimGlobal Imbalances, Financial Liberalization, and Exchange Rate Policy$
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Takatoshi Ito and Andrew K. Rose

Print publication date: 2008

Print ISBN-13: 9780226386829

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226387086.001.0001

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Pass-Through of Exchange Rates to Consumption Prices

Pass-Through of Exchange Rates to Consumption Prices

What Has Changed and Why?

(p.139) 5 Pass-Through of Exchange Rates to Consumption Prices
International Financial Issues in the Pacific Rim
José Manuel Campa, Linda S. Goldberg
University of Chicago Press

This chapter considers the evolution over the past decade in the predicted sensitivity of consumption prices of imported and domestically-produced goods with respect to exchange rates. It focuses on changes in distribution margins and imported inputs use, as well as on pass-through into import prices at the border for five broad categories of goods: manufactured, nonmanufactured, food, energy, and raw materials. One of the major findings of the study is that the degree of pass-through into import prices is more closely defined by industry than by country; the only exception is the United States. Pass-through into import prices is noisiest and least precisely measured with respect to energy imports. This may be due to regulatory changes in the energy sector in many countries. Pass-through effects are also very precisely estimated among manufactured goods and food in many countries. It is argued that growth in imported input use, especially in distribution services, has increased the predicted sensitivity of retail prices of imported goods to exchange rates.

Keywords:   consumption prices, imported goods, exchange rates, food, energy, raw materials, manufactured goods, import prices, pass-through

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