Monthly pass-through ratios
Abstract: This paper estimates monthly pass-through ratios from import prices to consumer prices in real time. Conventional time series methods impose restrictions to generate exogenous shocks on exchange rates or import prices when estimating pass-through coefficients. Instead, a natural experiment based on data releases defines our shock to foreign prices. Our estimation strategy follows an event-study approach based on monthly releases in import prices. Projections from a dynamic common factor model with daily panels before and after monthly releases of import prices define the shock. This information shock allows us to recover a monthly pass-through ratio. We apply our identification procedure to Swiss prices and find strong evidence that the monthly pass-through ratio is around 0.3. Our real-time estimates yield higher pass-through ratios than time series estimates.
File(s): File format is application/pdf http://dallasfed.org/assets/documents/institute/wpapers/2009/0026.pdf
Provider: Federal Reserve Bank of Dallas
Part of Series: Globalization Institute Working Papers
Publication Date: 2009
Pages: 37 pages
Note: Published as: Amstad, Marlene and Andreas M. Fischer (2010), "Monthly Pass-Through Ratios," Journal of Economic Dynamics and Control 34 (7): 1202-1213.