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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 123:
Exchange Rate Pass-Through to Swedish Import Prices

Malin Adolfson ()

Abstract: Swedish import price determination is investigated using disaggregated monthly data from 1980:1 to 1995:05 for eight different industries. The cointegration analysis indicates two cointegrating relations, in all industries, between import prices, the exchange rate, world market prices and domestic prices. Two- equations systems involve an unclear definition of long-run exchange rate pass-through. Pass-through is defined as the total effect a nominal exchange-rate change has on the import price. The estimate thus includes the direct effect on import prices as well as the effect working through home market prices. Total pass-through estimates indicate a limited pass-through and thus pricing to market behaviour in the majority of industries. The estimates range from 27% to 160%. Tests of linear restrictions on the cointegrating vectors indicate a complete long-run pass-through in most industries. Short-run pass-through is limited to about 25%.

Keywords: Pricing to market; pass-through; exchange rates; import prices; cointegration; (follow links to similar papers)

JEL-Codes: F31; F41; (follow links to similar papers)

29 pages, September 1996

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This paper is published as:
Adolfson, Malin, (1997), 'Exchange Rate Pass-Through to Swedish Import Prices', Finnish Economic Papers, Vol. 10, Autumn, No. 2, pages 81-98



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