Exchange rates and traded goods prices

This paper examines the effect of tariffs and exchange rates on U.S. prices of Japanese cars, trucks and motorcycles. In particular, we test whether the long run pass-through of tariffs and exchange rates are identical: the symmetry hypothesis. We find that this hypothesis is easily accepted in our sample. We also find that the pass-through relation varies across products, ranging from about 0.6 for trucks to unity for motorcycles. These coefficients have very different implications for trade policy. We explain the results based on demand, cost and institutional conditions in each industry. We also find weak evidence that the pass-through of exchange rates has fallen in more recent years.

Symmetric Pass-Through of Tariffs and Exchange Rates Under Imperfect Competition: An Empirical Test

https://www.nber.org/system/files/working_papers/w2453/w2453.pdf

This paper uses a dynamic panel data model to estimate the pass-through coefficients of 20 nine-digit industrial commodities that are traded between Japan and its East Asian and industrial country trading partners. By using the monthly series of unit export and import values obtained from the Japanese customs data for the period 1988–99, it shows that price pass-through is much larger for Japanese exports than for Japanese imports, suggesting that the yen prices of Japanese imports do not fall (rise) very much when the yen appreciates (depreciates), whereas the prices of Japanese exports rise (fall) considerably in the buyeris currency. With the notable exception of some imports from Malaysia, the degree of price pass-through was not qualitatively affected by the Asian currency crisis of 1997. Copyright 2001, International Monetary Fund

Exchange Rate Movements and Tradable Goods Prices in East Asia: An Analysis Based on Japanese Customs Data, 1988-1999

This article examines the size and persistence of international deviations from the law of one price in an industry with search frictions. Cost differences lead foreign and domestic firms to price differently within countries. When local firms are more common in each country, there are large and persistent price differences across countries. Large and persistent changes in international relative costs lead to large and persistent changes in international relative prices. Dynamic considerations imply that the amount of a cost shock firms pass through to prices is U-shaped in the market share of firms receiving the shock.

https://papers.ssrn.com/sol3/Delivery.cfm/iere_305.pdf?abstractid=608487&mirid=5

Robert S. Dohner

Papers

Export pricing, flexible exchange rates, and divergence in the prices of traded goods