Research Discussion Papers, Bank of Finland
No 26/1996:
The Pass-Through of Exchange Rate Changes to Import Prices
Uwe Ketelsen and Mika Kortelainen
Abstract: In this paper we analyze the empirical relevance of
exchange rate pass-through for Finland, Sweden and Denmark during the
period 1980–1994. Further, we attempt to determine if there has been a
structural change in the pass-through relationship in the1990s. We find
that about half the changes in exchange rates and world prices are passed
through to import prices within one year, and three-quarters of such
changes are passed through to import prices in two years. Moreover, there
are no major differences among countries. Parameter constancy tests
indicate the possibility of a structural change where the pass-through has
slowed in recent years. Possible explanations of this are that the exchange
rate regime has changed and competition has increased.
Keywords: exchange rate pass-through; import prices; structural change; (follow links to similar papers)
33 pages, October 29, 1996
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