Exchange Rate Pass-Through in U.S. Manufacturing Industries
- 1 February 1997
- journal article
- Published by MIT Press in The Review of Economics and Statistics
- Vol. 79 (1) , 95-104
- https://doi.org/10.1162/003465397556430
Abstract
This paper studies exchange rate pass-through in U.S. manufacturing industries and its cross-sectional variation. Through an adapted Dixit-Stiglitz model of product differentiation, the paper predicts that pass-through is positively related to the degree of product differentiation and inversely related to the elasticity of marginal cost with respect to output. Empirical estimates of the pass-through elasticities show that pass-through is incomplete and varies across industries. The degree of pass-through is found to be positively correlated to different proxies for product differentiation, and negatively to a proxy for the elasticity of marginal cost. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of TechnologyKeywords
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