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The adjustment of global external imbalances does partial exchange rate pass-through to trade prices matter?
| Content Provider | Library of Congress - Books/Printed Material |
|---|---|
| Author | Sheets, Nathan Gust, Christopher J. |
| Temporal Coverage | 2006 |
| Abstract | "Recent papers have found evidence of a decline in exchange rate pass-through to import prices in the United States and in a number of other industrial countries as well. This paper examines the implications of a decline in pass-through for the prospective adjustment of global external imbalances. We find that a decline in pass-through to trade prices may mute the responsiveness of the nominal trade balance to shifts in the exchange rate, but that a decline in pass-through does not shut down nominal adjustment completely. We also find that the channels of adjustment vary with pass-through. When pass-through is high, nominal adjustment is driven by moves in trade quantities. When pass-through is low, nominal adjustment mainly reflects shifts in the terms of trade (i.e., export prices relative to import prices). Our work employs a forward-looking, optimizing model in which firms set their prices with an eye toward maintaining their competitiveness against other producers; this feature of the model generates a variable desired markup and, hence, exchange rate pass-through that is less than complete"--Federal Reserve Board web site. |
| Language | English |
| Publisher | Federal Reserve Board, |
| Publisher Place | Washington, D.C. |
| Part of Series | Catalog |
| Requires | HTML5 supported browser |
| Access Restriction | Open |
| Subject Keyword | Dge Model Export Prices Import Prices Trade Balance |
| Subject Domain (in LCSH) | Import prices; |
| Subject Domain (in LCSH) | export prices; |
| Subject Domain (in LCSH) | trade balance; |
| Subject Domain (in LCSH) | DGE model |
| Subject Domain (in LCC) | HG3879 |
| Content Type | Text |
| Resource Type | Book |
