Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
964849 | Journal of International Money and Finance | 2007 | 24 Pages |
Abstract
This paper documents a robust and sustained decline in exchange rate pass-through to U.S. import prices, from well above 0.5 during the 1970s and 1980s to around 0.2 over the last decade. We attribute this decline to the rising prominence of competition from China, a shift in import pricing behavior since the Asian financial crisis, and the reduced share of material-intensive goods in U.S. imports. We also find evidence that foreign exporters are increasingly setting their prices with an eye on U.S. prices. These results, in turn, suggest a new and more general hypothesis linking the decline in pass-through to the evolving nature of competition in global markets and structural changes in international production patterns.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Mario Marazzi, Nathan Sheets,