Exchange rate regimes and import pricing

To what extent exchange rate variations are passed through into import prices has been on the research agenda over the past decade. Research efforts have focused on the very existence of pricing to market and on differences in pass-through behaviour between industries. Much less research has been devoted to the factors behind variations in pass-through behaviour within industries, and to changes in this behaviour over time. The change of exchange rate regime in Sweden in 1992 is used here to illustrate how the interaction between alternative exchange rate regimes, fixed and floating, and pricing behaviour affects pass-through behaviour. The study concentrates on the passenger car industry.