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Industrial pricing in Brazil in the 2010s: The pass-through effect

Author

Listed:
  • Felipe Câmara

    (IBGE, UFF, Brazil)

  • Carmem Feijo

    (UFF, CNPq, Brazil)

Abstract

The aim of this paper is to discuss the impact of costs on industrial inflation in Brazil. Assuming that inflation is mainly cost-push, this paper estimates the exchange rate pass-through on industrial prices. Based on Kalecki's price equation, the paper explores data from the producer price index from 2010 onward. One of the main findings is that more than 60% of the inflationary acceleration in the industrial prices can be explained by exchange rate devaluations. The econometric exercise also showed that when demand increases, even if labor unit costs do not change, firms increase their profit margin. Finally, the paper questions the effectiveness of the inflation targeting policy, when the diagnosis to the pressure on prices comes from the costs, and not from demand

Suggested Citation

  • Felipe Câmara & Carmem Feijo, 2017. "Industrial pricing in Brazil in the 2010s: The pass-through effect," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 17(1), pages 60-72.
    • Handle: RePEc:anp:econom:v:18:y:2017:1:60_72
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    More about this item

    Keywords

    Exchange rate pass-through; Industrial pricing; Cost inflation;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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