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Exchange-rate pass-through in the G-7 countries

Jane E. Ihrig, Mario Marazzi and Alexander Rothenberg
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Jane E. Ihrig: https://www.federalreserve.gov/econres/jane-e-ihrig.htm

No 851, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper examines the current thinking on exchange-rate pass-through to both import prices and consumer prices and estimates the extent to which they have fallen in the G-7 countries since the late 1970s and 1980s. For import-price pass-through we find that all countries experience a numerical decline in the responsiveness of import prices to exchange-rate movements; for nearly half of these countries the decline between 1975-1989 and 1990-2004 is statistically significant. We estimate that while a 10 percent depreciation in the local currency would have increased import prices by nearly 7 percent on average across these countries in the late 1970s and 1980s, it would have only increased import prices by 4 percent in the last 15 years. The responsiveness of consumer prices to exchange-rate movements declines for nearly every country, with the decline being statistically significant for two countries. Specifically, while a 10 percent depreciation in the local currency would have increased consumer prices by almost 2 percent on average in the late 1970s and 1980s, it would have had a neutral effect on consumer prices in the last 15 years.

Keywords: Foreign exchange rates; Pricing; Group of Seven countries (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-ifn and nep-mon
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Citations: View citations in EconPapers (89)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:851

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