Currency Choice and Exchange Rate Pass-Through
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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)
Date issued
2010-03Department
Sloan School of ManagementJournal
American Economic Review
Publisher
American Economic Association
Citation
Gopinath, Gita, Oleg Itskhoki, and Roberto Rigobon. “Currency Choice and Exchange Rate Pass-Through.” American Economic Review 100.1 (2010): 304–336.
Version: Final published version
ISSN
0002-8282
1944-7981