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Imported-inputs channel of exchange rate pass-through : Evidence from Korean firm-level pricing survey

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  • Imported-inputs channel of exchange rate pass-through
  • Ahn, JaeBin; Park, Chang-Gui
  • Bank of Korea


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Title Imported-inputs channel of exchange rate pass-through
Similar Titles
Sub Title

Evidence from Korean firm-level pricing survey

Material Type Reports
Author(English)

Ahn, JaeBin; Park, Chang-Gui

Publisher

[Seoul, South Korea]:Bank of Korea

Date 2014-04
Series Title; No Bank of Korea working paper / 2014-11
Pages 29
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Economy < Economic Administration
Economy < Economic System
Holding SSRN

Abstract

This paper studies the imported inputs channel of exchange rate pass through to the prices of domestically produced goods, exploring the firm-level pricing survey conducted by the Bank of Korea. The survey data reveal that imported inputs play a major role in transmitting exchange rate fluctuations to domestic producer prices, and that the degree of exchange rate pass-through tends to be nonlinear and asymmetric: it is higher when changes in exchange rate are large or when the local currency depreciates. A further investigation of the sources of nonlinearity and asymmetry supports the model's prediction that nonlinear pass-through may arise because large exchange-rate movements trigger additional indirect effects via industry-level price movements, while asymmetric pass-through can be driven by capacity constrained firms.