A large body of empirical work has found that exchange rate
movements have only modest effects on U.S. inflation. However,
exchange rate pass-through may be underestimated because some
price changes are missed when constructing price indexes. We investigate downward biases that arise when items exit or enter the
U.S. import price index. Using Bureau of Labor Statistics microdata
we find that, although potentially large in theory, the empirical
biases are modest over typical forecast horizons. As such, the
empirical evidence continues to support the conclusion that pass-through to U.S. import prices is low.
Gagnon, Etienne, Benjamin R. Mandel, and Robert J. Vigfusson.
"Missing Import Price Changes and Low Exchange Rate Pass-Through."
American Economic Journal: Macroeconomics,
Index Numbers and Aggregation; Leading indicators
Price Level; Inflation; Deflation