Exchange Rate Pass-Through Into Industry-Specific Prices: An Analysis With Industry-Specific Exchange Rates

Abstract

This paper examines the heterogeneity of exchange rate pass-through into industry-specific import, producer, and consumer prices. Results show that depending on the imported input contents, price responsiveness to the aggregate and relative exchange rate changes displays significant differences. We found that direct exchange rate impacts are more significant than indirect effects. The importance of the indirect effects is largely influenced from energy, basic metal, and chemical industries that provide intermediate inputs to others. The time horizon plays a role in the transition process: exchange rate pass-through tends to get stronger and spread to different price indices over time. The short-run impacts of aggregate exchange rate changes are not significant, while relative exchange rate changes partially transmit to producer and consumer prices in low-import content industries. In the long run direct impacts of both aggregate and relative exchange rates are significant on import prices in all industries and producer prices in high-import content industries. Another interesting finding is that the relative and aggregate exchange rate changes have opposing impacts on domestic prices: asymmetric information about industry-specific exchange rates can create pricing opportunities.

Invoicing currency, exchange rate pass‐through, and value‐added trade: The case of Turkey

“…Specifically, the estimated coefficient was 0.35 for the overall sample (excluding the coke, basic metals and chemical sectors), 0.55 for high intermediate import content sectors and 0.30 for low intermediate import content sectors. Note that the estimates for the overall sample and the sectors in the lower quantile in Table 7 are almost the same as the respective estimates in Saygılı and Saygılı (2019) whereas the estimated coefficient for the sectors in upper quartile is significantly lower.…”

“…However, only a few recent studies have focused on the significant role of intermediate goods imports and globalization in the effect of exchange rate pass‐through on domestic prices. Of these, Çiçek (2012) and Saygılı and Saygılı (2011, 2019) showed that integration with GVC‐affected exchange rate pass‐through dynamics in Turkey 5 , 6 . Saygılı and Saygılı (2019) examined the heterogeneity of exchange rate pass‐through into industry‐specific import, producer and consumer prices.…”

“…Of these, Çiçek (2012) and Saygılı and Saygılı (2011, 2019) showed that integration with GVC‐affected exchange rate pass‐through dynamics in Turkey 5 , 6 . Saygılı and Saygılı (2019) examined the heterogeneity of exchange rate pass‐through into industry‐specific import, producer and consumer prices. They showed that, depending on the sectors' imported input contents, sector‐level price responsiveness to aggregate and relative exchange rate changes displayed significant differences.…”

“…Earlier, using nominal effective (trade weighted) exchange rates, Saygılı and Saygılı (2019) estimated the pass‐through coefficients for the import prices of 10 Turkish manufacturing industries classified under the ISIC codes. These sectors were grouped into either high/low intermediate import content or high‐/low‐technology intensive industries.…”

Pricing to Market Behavior: Evidence from Albanian Exporting Firms

“…The practical implications of these findings are profound for both policymakers and business leaders within Albania. For policymakers, the sensitivity of export prices to exchange rates suggests a need for careful monetary policy crafting and exchange rate management to foster a stable economic environment that supports export competitiveness [21]. Additionally, understanding the impact of international competitor prices on Albanian export prices can guide trade policy and negotiations, potentially focusing on sectors where Albania has competitive advantages in product differentiation [13].…”