GEP Research Paper 04/13
Size Matters: Asymmetric Exchange Rate Pass-Through at the Industry Level
Patricia S. Pollard and Cletus C. Coughlin
Abstract
We analyze exchange rate pass-through into U.S. import prices for 29 industries to address two questions. First, does the direction of a change in the exchange rate affect the degree of pass-through? Second, does the size of a change in the exchange rate matter for pass-through? We find that firms in over half the industries respond asymmetrically to appreciation and depreciations, but the direction of asymmetry varies. Likewise, most firms respond asymmetrically to large and small changes in the exchange rate and pass-through is generally positively related to the size of the change. When taking into account both direction and size effects we find that the size effect dominates.
Issued in June 2004.
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