Malin Adolfson: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden
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%.
29 pages, September 1996
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