Work

Currency Choice and Exchange Rate Pass-Through

Year: 2010

Type: article

Abstract: We show, using novel data on currency and prices for US imports, that even conditional on a price change, there is a large difference in the exchange rate pass-through of the average good priced in dollars (25 percent) versus nondollars (95 percent). We document this to be the case across countries and within disaggregated sectors. This finding contradicts the assumption in an important class of models that the currency of pricing is exogenous. We present a model of endogenous currency choice in a dynamic price setting environment and show that the predictions of the model are strongly supported by the data. (JEL E31, F14, F31)

Source: American Economic Review

DOI: 10.1257/aer.100.1.304

Authors: Gita Gopinath, Oleg Itskhoki, Roberto Rigobon

Institutions: National Bureau of Economic Research, Harvard University, Princeton University, Massachusetts Institute of Technology

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2101520586

FWCI: 70.84

Cites: 66

Cited by: 635

Related to: 10