Exchange Rate Pass-Through To Export Prices: Assessing Some Cross-Country Evidence
A growing body of empirical work has found evidence of a decline in exchange rate pass-through to import prices in a number of industrial countries. This paper complements this work by examining pass-through from the other side of the transaction; that is, it assesses the exchange rate sensitivity of export prices (denominated in the exporter's currency). The author first sketches out a streamlined analytical model that highlights some key factors that determine pass-through. Using this model as reference, it's found that the prices charged on exports to the United States are more responsive to the exchange rate than is the case for export prices to other destinations, which is consistent with results in the literature suggesting that import price pass-through in the U.S. market is relatively low.