Exchange Rate Pass‐through Into Retail Prices

Abstract

We study exchange rate pass‐through and its determinants using scanner data on fast moving consumer goods sold by 1,041 outlets in the United Arab Emirates between 2006 and 2010. The data are augmented with country of origin information. Our main finding is that exchange rate pass‐through varies more across retailers within regions than across regions, and in particular that pass‐through increases with retailer market share. We also find that exchange rate pass‐through is negatively correlated with both product quality and the elasticity of substitution of the product category and positively correlated with the frequency of price adjustment.

International trade and retail market performance and structure: Theory and empirical evidence

“…The existence of such a link is suggested not only by the fact that most of these imports pass through the retail sector, but also that retailers themselves have played an active part in the rapid expansion of trade in consumer goods. 2 Finding answers to our questions matters from both a positive and a normative perspective. From a positive perspective, understanding what drives changes in retailing, including the growth of big retailers and retail chains and the exit of small retailers, matters not only because retailing is a big sector, accounting for around 10% of employment in many countries, but also because these changes have been a major source of retail productivity growth and, more importantly, aggregate productivity growth in industrialized countries since the mid-1990s (see, for instance, Triplett and Bosworth, 2004).…”

Research on exchange rate pass‐through effect based on artificial intelligence approach

“…Chen and Juvenal pointed out the commodity price adjustment caused by exchange rate change of the high‐quality commodity is less than that of the low‐quality commodity, and adjustment in the export price index is mainly caused by pricing to market (PTM). Antoniades and Zaniboni showed that ERPT rate of retailing industry is inversely proportional to the product quality and is dependent on the frequency of price adjustment. Bernini and Tomasi pointed out that the imports of intermediate goods might weaken the ERPT, albeit the effect is not observed in high‐quality products.…”

The Distributional Consequences of Large Devaluations

“…Auer et al (2014) propose a model of variable markups in which low exchange rate pass-through into high quality goods arises endogenously as a result of vertical differentiation, and demonstrate that higher-quality products have lower pass-through using detailed data on car sales in several European countries. Antoniades and Zaniboni (2015) use barcode-level data from several retailers in the UAE to show empirically that pass-through into retail prices is indeed lower for high quality goods. Chen and Juvenal (2016) use bottle-level data for Argentina's wine exports to show that pass-through is lower for higher-quality wine.…”