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Exchange Rate Pass-Through to Swedish Import Prices

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  • Adolfson, Malin

    (Department of Economics)

Abstract

Swedish import price determination is investigated using disaggregated monthly data from 1980:1 to 1995:05 for eight different industries. The cointegration analysis indicates two cointegrating relations, in all industries, between import prices, the exchange rate, world market prices and domestic prices. Two- equations systems involve an unclear definition of long-run exchange rate pass-through. Pass-through is defined as the total effect a nominal exchange-rate change has on the import price. The estimate thus includes the direct effect on import prices as well as the effect working through home market prices. Total pass-through estimates indicate a limited pass-through and thus pricing to market behaviour in the majority of industries. The estimates range from 27% to 160%. Tests of linear restrictions on the cointegrating vectors indicate a complete long-run pass-through in most industries. Short-run pass-through is limited to about 25%.

Suggested Citation

  • Adolfson, Malin, 1996. "Exchange Rate Pass-Through to Swedish Import Prices," SSE/EFI Working Paper Series in Economics and Finance 123, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0123
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    References listed on IDEAS

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    1. Peter Hooper & Catherine L. Mann, 1989. "Exchange Rate Pass-through in the 1980s: The Case of U.S. Imports of Manufactures," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 297-337.
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    4. Gottfries, N., 1994. "Market Shares, Financial Constraints, and Pricing Behavior in the Export Industry," Papers 586, Stockholm - International Economic Studies.
    5. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    6. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
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    Cited by:

    1. Gabriele Galati & William R. Melick, 2006. "The evolving inflation process: an overview," BIS Working Papers 196, Bank for International Settlements.
    2. von Hagen, Jürgen & Kube, Sebastian & Selten, Reinhard & Pope, Robin, 2006. "Experimental Evidence on the Benefits of Eliminating Exchange Rate Uncertainties and Why Expected Utility Theory causes Economists to Miss Them," Bonn Econ Discussion Papers 28/2006, University of Bonn, Bonn Graduate School of Economics (BGSE).
    3. Abdulnasser Hatemi-J & Manuchehr Irandoust, 2004. "Is Pricing to Market Behavior a Long-Run Phenomenon? A Non-Stationary Panel Analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 31(1), pages 55-67, March.
    4. Alali, Walid Y., 2012. "Simple Rules of the Monetary Policy and Incomplete Exchange Rate Pass-Through," EconStor Preprints 269882, ZBW - Leibniz Information Centre for Economics.
    5. Adolfson, Malin, 2007. "Incomplete exchange rate pass-through and simple monetary policy rules," Journal of International Money and Finance, Elsevier, vol. 26(3), pages 468-494, April.
    6. Adolfson, Malin, 2001. "Optimal Monetary Policy Delegation under Incomplete Exchange Rate Pass-Through," SSE/EFI Working Paper Series in Economics and Finance 477, Stockholm School of Economics.
    7. Guneratne Banda Wickremasinghe & Param Silvapulle, 2004. "Exchange Rate Pass-Through to Manufactured Import Prices: The Case of Japan," International Trade 0406006, University Library of Munich, Germany.
    8. Juan Manuel Julio-Román, 2019. "Estimating the Exchange Rate Pass-Through: A Time-Varying Vector Auto-Regression with Residual Stochastic Volatility Approach," Borradores de Economia 1093, Banco de la Republica de Colombia.
    9. Alali, Walid Y., 2012. "Simple Rules of the Monetary Policy and Incomplete Exchange Rate Pass-Through," MPRA Paper 116483, University Library of Munich, Germany.
    10. Adolfson, Malin, 2002. "Implications of Exchange Rate Objectives under Incomplete Exchange Rate Pass-Through," Working Paper Series 135, Sveriges Riksbank (Central Bank of Sweden).

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    More about this item

    Keywords

    Pricing to market; pass-through; exchange rates; import prices; cointegration;
    All these keywords.

    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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