Imported Intermediate Goods and Incomplete Exchange Rate Pass-Through into Export Prices

Arbeitspapier

This paper analyses the effect of imported inputs and the exporting country share on the degree of exchange rate pass-through (ERPT) into export prices. I present a model where firms set variable markups under oligopoly competition and imported inputs affect marginal cost. It makes two predictions: (i) the imported input share reduces ERPT (ii) the exporting country share in a destination market increases ERPT. Using industry-level data, I test the hypotheses for 57 countries over the period 2000-2015. For trade between advanced economies, imported inputs reduce ERPT, but only in the case of producer currency movements. Controlling for exporting country share, the pass-through elasticity is 39% when imported inputs are not used, but 11% when the share of imported inputs in gross exports rises to one half.

Object Details

• Language: Englisch

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Empirical Studies of Trade ; Foreign Exchange ; Open Economy Macroeconomics
• Subject: exchange rate pass-through ; export prices ; global value chains

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Firanchuk, Alexander
• Event: Veröffentlichung
• (who): ZBW – Leibniz Information Centre for Economics
• (where): Kiel, Hamburg
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/182400
• Last update: 10.03.2025, 11:43 AM CET