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Exchange rate pass-through in a small open economy: Panel evidence from Hong Kong

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  • David C. Parsley

Abstract

This paper presents estimates of exchange rate pass-through derived from a panel of very disaggregated import unit-values to Hong Kong. The estimation approach builds on that utilized by Knetter (1989, 1993) to study export pricing and pricing to market. The three-dimensional data set examined comprises Hong Kong's top eight floating exchange rate trading partners, and twenty-one of the top 5-digit SITC imports since 1992. Pass-through estimates for Hong Kong imply relatively faster import price adjustment than is typically found for larger, less open economies. These estimates are robust to a number of sensitivity tests. Finally these results confirm, from a different perspective, findings by Parsley (2001) that deviations from the law of one price play a relatively smaller role in real exchange rate movements for Hong Kong to be supplies than for other East Asian countries. Copyright © 2003 John Wiley & Sons, Ltd.

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  • David C. Parsley, 2003. "Exchange rate pass-through in a small open economy: Panel evidence from Hong Kong," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 99-107.
    • Handle: RePEc:ijf:ijfiec:v:8:y:2003:i:2:p:99-107
    DOI: 10.1002/ijfe.202
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    1. David C. Parsley, 2012. "Exchange Rate Pass-through in South Africa: Panel Evidence from Individual Goods and Services," Journal of Development Studies, Taylor & Francis Journals, vol. 48(7), pages 832-846, January.
    2. Sri Isnowati & Fx Sugiyanto & Akhmad Syakir Kurnia & Endang Tjahjaningsih, 2020. "Exchange Rate Pass Through Viewed from Wholesale Price in Indonesia," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(3), pages 137-147.
    3. Mehrotra, Aaron N., 2007. "Exchange and interest rate channels during a deflationary era--Evidence from Japan, Hong Kong and China," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 188-210, March.
    4. Mehrotra, Aaron N., 2007. "Exchange and interest rate channels during a deflationary era--Evidence from Japan, Hong Kong and China," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 188-210, March.
    5. repec:zbw:bofitp:2005_017 is not listed on IDEAS

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