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Exchange Rate Pass‐through: How Much do Exchange Rate Changes Affect the Prices of Australian Exports?

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  • Robyn Swift

Abstract

Australia is generally held to be a small open economy with a high proportion of commodity exports. It is therefore regarded as a ‘price taker’ in international markets, and pass‐through on exports is expected to be zero. This paper uses the Johansen Multivariate Cointegration technique to estimate the pass‐through of exchange rate changes to the destination‐currency prices of aggregate Australian exports. The results demonstrate a stable long‐run pass‐through level of 60 per cent, which refutes the ‘small‐country’ assumption of Australian exporters as price takers. These findings have important implications for Australia's terms of trade and current account deficit

Suggested Citation

  • Robyn Swift, 1998. "Exchange Rate Pass‐through: How Much do Exchange Rate Changes Affect the Prices of Australian Exports?," Australian Economic Papers, Wiley Blackwell, vol. 37(2), pages 169-184, June.
    • Handle: RePEc:bla:ausecp:v:37:y:1998:i:2:p:169-184
    DOI: 10.1111/1467-8454.00013
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    Cited by:

    1. Syed Kanwar Abbas & Prasad Sankar Bhattacharya & Debdulal Mallick & Pasquale Sgro, 2016. "The New Keynesian Phillips Curve in a Small Open Economy: Empirical Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 92(298), pages 409-434, September.
    2. Süleyman Hilmi Kal & Muhsin Çiftçi, 2022. "Market structure and exchange rate pass‐through in the Turkish manufacturing industry: Evidence from sectoral data," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 995-1016, October.
    3. David Norman, 2006. "Modelling Manufactured Exports: Evidence from Australian States," RBA Research Discussion Papers rdp2006-01, Reserve Bank of Australia.
    4. Prof. Neil D. Karunaratne, 2002. "Microeconomic Shocks, Depreciation and Inflation: an Australian Perspective," Discussion Papers Series 298, School of Economics, University of Queensland, Australia.

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