Pass Through Paper Applied Economics May 2016.pdf (107.99 kB)
Non-linear exchange rate pass through in industrial economies
This paper presents theoretical arguments for a non-linear pass-through relationship for import and export prices and investigates the relationship empirically. The theoretical argument is based on the menu-cost approach in which small absolute changes in exchange rates may not prompt price changes because the costs of doing so exceed the extra profits generated for firms involved in international trade. This relationship is investigated empirically using quarterly data for the period 1979q1 to 2015q1 for a sample of seventeen countries. In the case of import prices, evidence is found of non-linear adjustment consistent with the theoretical model in four out of seventeen cases. In the case of export prices, such a relationship is only evident for two economies in the sample. However, for both the import and export price cases, a significant positive non-linear relationship is found for the two largest economies in the sample i.e. the United States and Japan.
History
School
- Business and Economics
Department
- Economics
Published in
Applied EconomicsCitation
TURNER, P. and WOOD, J.A., 2017. Non-linear exchange rate pass through in industrial economies. Applied Economics, 49 (4), pp. 397-402.Publisher
© Taylor & FrancisVersion
- AM (Accepted Manuscript)
Publisher statement
This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/Acceptance date
2016-05-30Publication date
2017Notes
This is an Accepted Manuscript of an article published by Taylor & Francis in Applied Economics on 24 Jun 2016, available online: http://dx.doi.org/10.1080/00036846.2016.1197374.ISSN
0003-6846eISSN
1466-4283Publisher version
Language
- en