TY  - JOUR
AU  - Campa,Jose Manuel
AU  - Goldberg,Linda S.
TI  - Pass Through of Exchange Rates to Consumption Prices: What has Changed and Why?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12547
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12547
L1  - http://www.nber.org/papers/w12547.pdf
N1  - Author contact info:
Jose M. Campa
IESE Business School
Camino del Cerro del Aguila, 3
28023 Madrid
SPAIN
Tel: 34-91-357-0809
Fax: 34-91-357-2913
E-Mail: jcampa@iese.edu

Linda S. Goldberg
Research Department, 3rd Floor
Federal Reserve Bank-New York
33 Liberty Street
New York, NY 10045
Tel: 212/720-2836
Fax: 212/720-6831
E-Mail: linda.goldberg@ny.frb.org
M3  - presented at "East Asian Seminar on Economics", June 22-24, 2006
AB  - In this paper, we use cross-county and time series evidence to argue that retail price sensitivity to exchange rates may have increased over the past decade.  This finding applies to traded goods, as well as to non-traded goods. We highlight three reasons for changing pass through at the level of retail prices of goods.  First, pass through may have declined at the level of import prices, but the evidence is mixed over types of goods and countries. Second, there has been a large expansion of imported input use across sectors. This means that the costs of imported goods as well as home tradable goods have heightened sensitivity to import prices and exchange rates. The final channel we consider is whether there have been changing sectoral expenditures on distribution services, with the direction of change negatively correlated with pass through into final consumption prices.  We find that this channel, which has been a means of insulating consumption prices from import content and exchange rates, has not systematically changed in recent years. The balance of effects weighs in favor of increased sensitivity of consumption prices to exchange rates, even if exchange-rate pass-through into import prices has declined for some types of goods.
ER  -