Importers, Exporters, and Exchange Rate Disconnect
- (pp. 1942-78)
AbstractLarge exporters are simultaneously large importers. We show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. We develop a theoretical framework with variable markups and imported inputs, which predicts that firms with high import shares and high market shares have low exchange rate pass-through. We test and quantify the theoretical mechanism using Belgian firm-product-level data on imports and exports. Small nonimporting firms have nearly complete pass-through, while large import-intensive exporters have pass-through around 50 percent, with the marginal cost and markup channels contributing roughly equally.
CitationAmiti, Mary, Oleg Itskhoki, and Jozef Konings. 2014. "Importers, Exporters, and Exchange Rate Disconnect." American Economic Review, 104 (7): 1942-78. DOI: 10.1257/aer.104.7.1942
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F14 Empirical Studies of Trade
- F31 Foreign Exchange
- L60 Industry Studies: Manufacturing: General