American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Missing Import Price Changes and Low Exchange Rate Pass-Through
American Economic Journal: Macroeconomics
vol. 6,
no. 2, April 2014
(pp. 156–206)
Abstract
A large body of empirical work has found that exchange rate movements have only modest effects on U.S. inflation. However, exchange rate pass-through may be underestimated because some price changes are missed when constructing price indexes. We investigate downward biases that arise when items exit or enter the U.S. import price index. Using Bureau of Labor Statistics microdata we find that, although potentially large in theory, the empirical biases are modest over typical forecast horizons. As such, the empirical evidence continues to support the conclusion that pass-through to U.S. import prices is low.Citation
Gagnon, Etienne, Benjamin R. Mandel, and Robert J. Vigfusson. 2014. "Missing Import Price Changes and Low Exchange Rate Pass-Through." American Economic Journal: Macroeconomics, 6 (2): 156–206. DOI: 10.1257/mac.6.2.156Additional Materials
JEL Classification
- C43 Index Numbers and Aggregation; Leading indicators
- E31 Price Level; Inflation; Deflation
- E52 Monetary Policy
- F31 Foreign Exchange
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