Exchange rate pass-through to domestic producer prices: Evidence from Korean firm-level pricing survey

This note studies exchange rate pass-through to the prices of domestically produced goods, exploring the firm-level pricing survey conducted by the Bank of Korea. The data reveal the imported inputs channel of, as well as nonlinear and asymmetric, exchange rate-pass-through.     

Tobin's Q channel and monetary policy rules under incomplete exchange rate pass-through

This paper focuses on the role of the Tobin's Q channel in a two-country framework in which exporting firms set their prices on the basis of local currency pricing. Incomplete exchange rate pass-through significantly affects the Tobin's Q channel in each country compared with the case of complete exchange rate pass-through. We explore whether different specifications of monetary policy enhance social welfare. Regardless of the degree of home bias, a monetary policy rule that stabilizes domestic asset prices attains preferable outcomes to several alternative policy rules considered in our analysis. Notably, there are large gains from employing a domestic asset price rule when the home bias is large. A monetary policy rule that stabilizes the asset prices of both countries results in worse outcomes. Our simulation results suggest that stabilizing asset prices is important in an open economy with incomplete exchange rate pass-through.     

Carbon tax pass-through in Canadian retail gasoline markets

A carbon tax's pass-through is one factor influencing its effectiveness in internalizing the externality created by greenhouse gas emissions. This paper measures the pass-through of carbon taxes introduced in retail gasoline markets of four Canadian provinces that did not meet the carbon pollution pricing federal benchmark stringency requirements. Those four provinces are Saskatchewan, Manitoba, Ontario and New Brunswick. Using daily retail gasoline prices for 40 treated cities and nine control cities we find the pass-through rates are city-specific and vary from 0% to over 140%. City-specific pass-through rates imply that estimations at a higher level of geographical aggregation assume homogeneous effects where heterogeneous effects might be present. Our results also suggest it would be difficult for a government to impose an optimal and nationwide carbon tax on automotive greenhouse gas emissions. Although the degree of competition can explain city-specific pass-through rates, it cannot explain over-shifting. Over-shifting can be explained, however, by the demand functional form.     

Exchange rate pass-through in New Member States and candidate countries of the EU

This paper studies the degree of exchange rate pass-through to the prices of imports of some New Member States (NMSs) of the European Union plus Turkey, coming from the euro area. I estimate industry-specific rates of pass-through across and within countries using the methodology proposed by Campa and González-Mínguez [Campa, J.M. and González-Mínguez, J.M. (2006). Differences in Exchange Rate Pass-Through in the Euro Area. European Economic Review, 50, 121–145.] which estimates the short- and long-run pass-through elasticities. I did not find evidence either in favour of the hypothesis of Local Currency Pricing (zero pass-through) or the hypothesis of Producer Currency Pricing (complete pass-through) for all the countries except for Slovenia and Cyprus. With reference to the results by industry, the lowest values for exchange rate pass-through are in Manufacturing sectors. However, I did observe a exchange rate pass-through decline through the pricing chain.     

STORABLE GOOD MARKET WITH INTERTEMPORAL COST VARIATIONS

We investigate a firm's dynamic pricing policy in a storable good market where the cost of production varies over time. In anticipation of a cost increase, the firm selects its prices to affect consumer storage. Price dynamics hinge upon the curvature of demand and the magnitude of the consumer storage cost. When demand is not too convex, the consumers' reluctance to store leads the firm to reduce prices to stimulate consumer storage. This shapes the firm's cost pass-through and the price commitment effects. Our analysis provides a novel explanation for the well-documented puzzling patterns of incomplete and negative cost pass-through.     

The impact of a ‘soda tax’ on prices: evidence from French micro data

Based on an original data set of more than 500,000 non-alcoholic beverage price records, we evaluate the impact on consumer prices of the ‘soda tax’, an excise on drinks with added sugar or sweetener, introduced in France in January 2012. We adopt a difference in differences approach and find that the tax was gradually passed through to the prices of the taxed beverages. After 6 months of its introduction, it was fully shifted to soda prices and almost fully shifted to the prices of fruit drinks, while the pass-through for flavoured waters was incomplete. We also find that the pass-through was heterogeneous across brands and retail groups.     

The determinants of retail petrol prices in Greece

The purpose of this article is to examine the relationship between retail prices of petrol, international oil prices and tax rates in Greece. We examine not only the hypothesis that retail prices act asymmetrically to crude oil price changes and the pass-through rates of tax increases, but also use the cross-sectional dimension of the data to explore whether the existence or otherwise of market power affects retail prices. Our results provide little evidence for asymmetric behaviour. However, the degree to which prices overreact to tax changes and the significance of market power across the different regions suggests that the market for petrol/diesel is not very competitive.     

Modeling asymmetric price transmission in the European food market

In this study, we employ a multivariate panel error correction model (PVECM) to investigate asymmetric price transmission among the farm, processor, and retail segments of the European food supply chain for the 2005–2016 period. The results indicate that, in both the long- and short-run, retail prices respond more strongly to processor price increases than decreases and the same occurs for processor prices due to farm price changes. Thus, the findings demonstrate the presence of positive asymmetric price transmission in the European food supply chain. Finally, the results of the present study indicate that the food price pass-through varies greatly across product category and across countries, and that the pass-through to producer prices is greater than that to consumer prices.     

Trade liberalisation and exchange rate pass-through: the case of textiles and wearing apparels

Studies on the relationship between exchange rates and traded goods prices typically find evidence of incomplete pass-through, usually explained by pricing-to-market behaviour. Although economic theory predicts that incomplete pass-through may also be linked to the presence of non-tariff barriers to trade, variables reflecting such a link is rarely included in empirical models. In this paper, we estimate a pricing-to-market model for Norwegian import prices on textiles and wearing apparels, controlling for non-tariff barriers to trade and shift in imports from high- to low-cost countries. We apply the cointegrated VAR approach and develop measures of foreign prices based on superlative price indices (including the Törnqvist and Fischer price indices) and a data calibration method necessary to approximate relative price levels across countries. Our measures of foreign prices thereby account for inflationary differences and varying import shares and price level differences (known as the China effect) among trading partners. We show that these measures of foreign prices, unlike standard measures used in the pricing-to-market literature, are likely to produce unbiased estimates of pass-through. Once the China effect is controlled for, we find little evidence that pass-through has changed alongside trade liberalisation.     

Pass-through in United States beef cattle prices: a test of Ricardian rent theory

Feeder cattle are fattened to become fed live cattle 6 months later, and the feeder cattle stock is fixed in the short-run. Efficiency in competitive markets suggests feeder cattle prices should fully reflect feed prices and information on future fed cattle prices. Employing a long time series (1979–2004) of feeder cattle futures, live cattle futures, and local corn prices, we test whether complete pass-through occurs. For fed cattle futures prices, we find about 93% of complete pass-through to present feeder cattle prices. The corresponding negative effect of a corn price increase is about 87% of complete pass-through. In contrast with imperfectly competitive agricultural land rental markets, the results support the hypothesis of Ricardian rent extraction by the scarce asset owner in feeder cattle markets.     

Time lags in the pass-through of crude oil prices: big data evidence from the German gasoline market

This article investigates the pass-through of global Brent oil notations to fuel prices across the oligopoly of retail majors in Germany. We assemble a high-frequency panel data set that encompasses millions of price observations and allows us to distinguish effects by brand. Upon establishing a cointegrating relationship between fuel and crude oil prices using daily data, we estimate an ECM and find that (1) the pass-through of oil prices critically depends on the number of time lags included in the ECM; (2) strict adherence to classical information criteria for determining lag length yields extremely long pass-through durations and (3) the estimated impulse response functions are virtually identical across brands, irrespective of the lag count, suggesting a high degree of competition among brands.     

Bank asset quality & monetary policy pass-through

The funding mix of European firms is weighted heavily towards bank credit, which underscores the importance of efficient pass-through of monetary policy actions to lending rates faced by firms. Euro area pass-through has shifted from being relatively homogenous to being fragmented and incomplete since the financial crisis. Distressed loan books are a crisis hangover with direct implications for profitability, hampering banks ability to supply credit and lower loan pricing in response to reductions in the policy rate. This paper presents a parsimonious model to decompose the cost of lending and highlight the role of asset quality in diminishing pass-through. Using bank-level data over the period 2008–2014, we empirically test the implications of the model. We show that a one percentage point increase in the impairment ratio lowering short run pass-through by 3%. We find that banks with severely impaired balance sheets do not adjust their loan pricing in response to changes in the policy rate at all. We derive a measure of the hidden bad loan problem, the NPL gap, which we define as the excess of non-performing loans over impaired loans. We show that it played a significant role in the fragmentation of euro area pass-through post-crisis.     

企业最优定价策略与汇率传递效应研究

文章在李嘉图理论模型的框架下讨论了两国企业的最优定价策略,在此基础上分析了汇率传递效应。研究表明,汇率传递效应具有某种突变性,其突变的边界条件依赖于两国市场需求特征、贸易摩擦与两国企业的边际成本。     

Exchange-rate pass-through in Japanese export pricing

Two recent aggregative studies claim to demonstrate that Japanese exporters absorb a proportion of exchange-rate changes in their profit margins; but the estimates of this proportion are dramatically different. This study accounts for the discrepancy, and shows that neither estimate is credible. These results identify incomplete pass-through, conditional on costs, as a transitory consequence of export pricing in currencies other than yen. The only long-run effect of the exchange rate on yen-dominated export prices operates through imported materials prices.     

Global influences on UK manufacturing prices: 1970-2000

We introduce the first consistent series of domestic-product and related import price indices at the industry level for the UK, using the data to analyse both domestic and international determinants of UK manufactured product prices. Foreign influences on UK prices in domestic markets are always present, but domestic cost movements dominate. We show that the pass-through of world-price, tariff and exchange rate changes into product prices is partial in general and varies markedly between product categories. Standard tariff and exchange rate theories overstate price responses to global pricing determinants and fail to allow for variation between industrial sectors. Such theories can mislead when used for policy analysis and prediction.     

Import price dynamics in major advanced economies and heterogeneity in exchange rate pass-through

This article aims at showing heterogeneity in the degree of exchange rate pass-through to import prices in major advanced economies at three different levels: (1) across destination markets; (2) across types of exporters [distinguishing developed economy (DE) from emerging economy (EE) exporters] and (3) over time. Based on monthly data over the period 1991–2007, the results show first that large destination markets exhibit the lowest degree of pass-through. The degree of pass-through for goods imported from EEs is also significantly lower than for those from DEs. Regarding the evolution over time, no clear change in pricing behaviours can be identified and the well-identified decline in the exchange rate pass-through between the 1980s and 1990s appears to have stopped during the period considered.     

Market volatility and retail interest rate pass-through

Using the asymmetric threshold cointegration test proposed by Enders and Siklos [Enders, W., Siklos, P., 2001. Cointegration and threshold adjustment. Journal of Business and Economic Statistics 19, 166–176] and the EC-EGARCH (1, 1)-M model, this study examines the interest rate pass-through mechanism between the money market rate and the retail interest rate. In addition, we also investigate the impact of the interest rate volatility on the interest rates of the U.S. and nine Asian countries. We find that the complete pass-through only exists in the U.S. deposit rate. The threshold cointegration test results show that the asymmetric cointegration relation exists in the deposit interest rate in five countries and in the lending rate in three countries. The symmetric cointegration relation exists in two countries. Besides, an estimation of the conditional means using the EC-EGARCH (1, 1)-M model shows that the effect of interest rate volatility on the retail interest rate differs from country to country. Among the eight countries that exhibit asymmetric adjustments in the short run, five of them are found to have upwards rigid adjustments in the deposit interest rate and three downwards rigid adjustments in the lending rate. The empirical results of Hong Kong, Taiwan, and the Philippines support the hypothesis of collusive pricing arrangements. As to the estimation of the conditional variance, among the seven countries that exhibit asymmetric volatility, the leverage effect in the lending rate exists in two of them.     

Exchange rates and commodity prices: the case of Australian metal exports

Exporters of homogeneous commodities are usually regarded as ‘price takers’ who operate in perfectly competitive international markets, so that the pass-through of exchange rate changes to foreign-currency prices must be zero. However, many Australian commodities are subject to influences that may produce more complex pricing strategies, for example, markets in which Australia is a dominant exporter, or where there are few buyers and sellers due to the presence of large multi-national corporations. This study uses multivariate cointegration techniques to examine the pricing of Australian metal exports, with particular emphasis on the degree and timing of the pass-through of exchange rate and other changes.     

碳排放权交易市场的信息流动关系——基于EUA市场和CER市场的实证研究

基于Granger因果关系检验方法和MGARCH-BEKK模型,从报酬溢出和波动溢出的角度,研究国际碳排放权交易市场中的主要商品———EUAs和sCERs各自的期货价格与现货价格之间以及两者的期货价格之间的信息流动关系。结果表明:两个市场的现货市场始终都处于价格信息中心,期货市场的价格发现功能较弱甚至未体现;信息波动溢出方面,EUA市场中期货市场处于波动信息中心,而CER市场中现货市场处于波动信息中心;EUA的期货市场与CER的期货市场之间存在相互的价格溢出效应与波动溢出效应,但EUA市场的期货价格对CER市场具有更大的波动溢出效应。     

Macroeconomics,finance, commodities: Interactions with carbon markets in a data-rich model

This article assesses the transmission of international shocks to EUA spot, EUA futures, and CER futures carbon prices using a broad dataset that includes 115 macroeconomic, financial and commodities indicators with daily frequency from April 4, 2008 to January 25, 2010 totalling 463 observations. The framework adopted is a Factor-Augmented Vector Autoregression model with latent factors extracted from the dataset, as proposed by Bernanke et al. (2005). The main results can be summarized as follows. First, based on impulse responses, we show that carbon prices tend to respond negatively (between ? 0.2 and ? 1.2 standard deviation) to an exogenous shock that reduces global economic indicators by one standard deviation. Second, we find evidence that the responses are heterogeneous among the different kinds of carbon prices: CER futures prices tend to react much more significantly than EUA spot and futures prices. Third, the factors explain about 50% of the total variance of all variables in the dataset. The largest contribution is accounted for by the factor correlated with commodities markets, which explains about 28% of the total variability.