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Market Entries and Exits and the Nonlinear Behaviour of the Exchange Rate Pass-Through into Import Prices

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  • Herger Nils

    (Study Center Gerzensee)

Abstract

This paper develops an empirical framework giving rise to a nonlinear behaviour of the exchange rate pass-through (ERPT). Rather than shifts between low and high infl ation, the nonlinearity arises when large swings in the exchange rate trigger market entries and exits of importing firms. Switching regressions are used to distinguish between low and high pass-through regimes of the exchange rate into import prices. For the case of Switzerland, the corresponding results suggest that, though infl ation has been low and stable, the ERPT still doubles in value in times of a rapid appreciation of the Swiss Franc.

Suggested Citation

  • Herger Nils, 2013. "Market Entries and Exits and the Nonlinear Behaviour of the Exchange Rate Pass-Through into Import Prices," Working Papers 13.08, Swiss National Bank, Study Center Gerzensee.
    • Handle: RePEc:szg:worpap:1308
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    References listed on IDEAS

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