Pass-Through of Imported Input Prices to Domestic Producer Prices: Evidence from Sector-Level Data

By JaeBin Ahn, Chang-Gui Park, Chanho Park

February 12, 2016

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Format: Chicago

JaeBin Ahn, Chang-Gui Park, and Chanho Park. Pass-Through of Imported Input Prices to Domestic Producer Prices: Evidence from Sector-Level Data, (USA: International Monetary Fund, 2016) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Motivated by stylized facts pointing to a dominant role of imported inputs in transmitting external price shocks to domestic prices, this paper zooms in to study the pass-through of imported input costs to domestic producer prices. Our approach constructs effective input price indices from sector-level price data combined with sector-level information on input-output linkages. Applying an error correction model specification to sector-level output and input prices, the long-run pass-through rate of effective imported input costs to domestic producer prices is estimated to be around 70 percent in Korea and almost 100 percent in selected European countries.

Subject: Import price indexes, Import prices, Inflation, Prices, Producer price indexes, Producer prices

Keywords: Coefficients from the DFE estimator, Cost pass-through, Exchange rate pass-through, Import price index, Import price indexes, Import prices, Imported input cost pass-through, Inflation, Input price, Pass-through coefficient, Pass-through parameter, Producer price index, Producer price indexes, Producer prices, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/023
Stock No:

WPIEA2016023
ISBN:

9781475522280
ISSN:

1018-5941

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