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Effects of a Free Trade Agreement on the Exchange Rate Pass‐through to Import Prices

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  • Arnoldo López Marmolejo

Abstract

This paper investigates the effect of trade liberalization on the exchange rate pass-through (ERPT) to import prices. To do so, it employs an empirical estimation of the effects of NAFTA on the Mexican ERPT, and uses a Ricardian general equilibrium model. The model identifies the direct relationship between the tariffs and the pass-through by good. The second channel is the effect that tariffs have on the composition of imports, altering indirectly the aggregate pass-through.
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  • Arnoldo López Marmolejo, 2011. "Effects of a Free Trade Agreement on the Exchange Rate Pass‐through to Import Prices," Review of International Economics, Wiley Blackwell, vol. 19(3), pages 475-493, August.
    • Handle: RePEc:bla:reviec:v:19:y:2011:i:3:p:475-493
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    10. Sushanta Mallick & Helena Marques, 2008. "Passthrough of Exchange Rate and Tariffs into Import Prices of India: Currency Depreciation versus Import Liberalization," Review of International Economics, Wiley Blackwell, vol. 16(4), pages 765-782, September.
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    12. Raphael Auer & Thomas Chaney, 2009. "Exchange Rate Pass-Through in a Competitive Model of Pricing-to-Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(s1), pages 151-175, February.
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    17. Coricelli, Fabrizio & Jazbec, Bostjan & Masten, Igor, 2006. "Exchange rate pass-through in EMU acceding countries: Empirical analysis and policy implications," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1375-1391, May.
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    Cited by:

    1. Hakan Orbay & Benan Zeki Orbay, 2013. "Export Subsidies and Exchange Rate Pass-through," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 627-635, September.
    2. Angel de la Fuente, 2011. "Human Capital and Productivity," Working Papers 530, Barcelona School of Economics.
    3. Hayakawa, Kazunobu & Kim, Han-Sung & Yoshimi, Taiyo, 2017. "Exchange rate and utilization of free trade agreements: Focus on rules of origin," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 93-108.
    4. Bram Daelemans & Joseph P. Daniels & Farrokh Nourzad, 2018. "Free Trade Agreements and Volatility of Stock Returns and Exchange Rates: Evidence from NAFTA," Open Economies Review, Springer, vol. 29(1), pages 141-163, February.
    5. Mallick, Sushanta & Marques, Helena, 2017. "Export prices, selection into exporting and market size: Evidence from China and India," International Business Review, Elsevier, vol. 26(6), pages 1034-1050.
    6. Hayakawa, Kazunobu & Kim, HanSung & Yoshimi, Taiyo, 2015. "FTA in international finance : impacts of exchange rates on FTA utilization," IDE Discussion Papers 494, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. Mallick, Sushanta & Marques, Helena, 2016. "Pricing strategy of emerging market exporters in alternate currency regimes: The role of comparative advantage," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 68-81.
    8. Mallick, Sushanta & Marques, Helena, 2016. "Does quality differentiation matter in exporters' pricing behaviour? Comparing China and India," China Economic Review, Elsevier, vol. 40(C), pages 71-90.

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    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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