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American Economic Review: Vol. 100 No. 1 (March 2010)
AER Volume. 100, Issue 1 | 
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Currency Choice and Exchange Rate Pass-Through
Article Citation
Gopinath, Gita,
Oleg Itskhoki, and
Roberto Rigobon. 2010. "Currency Choice and Exchange Rate Pass-Through."
American Economic Review,
100(1): 304-36.
DOI: 10.1257/aer.100.1.304
DOI: 10.1257/aer.100.1.304
Abstract
We show, using novel data on currency and prices for US imports, that even
conditional on a price change, there is a large difference in the exchange
rate pass-through of the average good priced in dollars (25 percent) versus
nondollars
(95 percent). We document this to be the case across countries and
within disaggregated sectors. This finding contradicts the assumption in an
important class of models that the currency of pricing is exogenous. We present
a model of endogenous currency choice in a dynamic price setting environment
and show that the predictions of the model are strongly supported by the data.
(JEL E31, F14, F31)
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Full-text Article
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Authors
Gopinath, Gita (Harvard U)
Itskhoki, Oleg (Princeton U)
Rigobon, Roberto (MIT)
Itskhoki, Oleg (Princeton U)
Rigobon, Roberto (MIT)
JEL Classifications
E31: Price Level; Inflation; Deflation
F14: Country and Industry Studies of Trade
F31: Foreign Exchange
F14: Country and Industry Studies of Trade
F31: Foreign Exchange
