Is the Exchange Rate Pass-Through into Import Prices Declining? Evidence from Chile

2012. Emerging Markets Finance & Trade. Vol. 48, Nº 1, Pp 100 - 116

Patricio Jaramillo G, Roberto Álvarez E, Jorge Selaive C

Abstract:

Several empirical studies have found that the exchange rate pass-through (ERPT) into import prices is not complete and declined during the 1990s. In this paper we carry out a reexamination of these findings using a unique database of disaggregated import prices both at the border and wholesale levels for Chile. Our results do not support previous conclusions. We find a complete and nondeclining ERPT in the long run at both pricing levels of Chilean imports. We extend previous evidence by showing that, in the short run, wholesale prices seem to be less sensitive to exchange rate variations. In addition, we find weak evidence of asymmetric pass-through from appreciations versus depreciations for the aggregate import indexes in the short run and the long run.

Palabras claves: exchange rate pass-through, import prices, local currency pricing, monetary policy, price-to-market

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