Daily exchange rate pass-through into micro prices

Abstract

This paper estimates the exchange rate pass-through (ERPT) by using good-level daily data on wholesale prices of imported agricultural products, where the identi…cation is achieved by using daily data on the domestic in ‡ation rate. The results of standard empirical analyses are in line with existing studies that employ lower frequencies of data by showing evidence for incomplete daily ERPT of about 5 percent. The key innovation is achieved when nonlinearities in ERPT are considered, where ERPT is doubled to about 10 percent when daily nominal exchange rate changes are above 0:55 percent, daily frequencies of price change are above 3:12 percent, and storage life of a product is above 10 weeks. Important policy implications follow.

A Model to Measure the Effects of Exchange Rate Variations on Prices

“…There are numerous studies such as Dornbusch (1987), Goldberg and Verboven (2001), Keyfitz (2004), Gagnon and Ihrig (2004), Frankel, Parsley and Wei (2005), Gagnon (2006), Campa and Goldberg (2006a), Campa and Goldberg (2006b), Goldberg and Campa (2010), Sadeghi et al (2012), Fetai (2013, Musunuru (2017), Cho-Hoi, Chi-Fai and Po-Hon (2018), Alvarez et al (2019), andAixalá, Fabro, andGadea (2020) which concern the investigation of exchange rate volatility effects on prices of goods and/or inflation, using different kinds of econometric models with aggregated imports. However, there are only a few studies that have measured the effects of the exchange rate variations on price indices of products employing input-output models.…”