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American Economic Review Vol. 104 No. 7 2014

Importers, Exporters, and Exchange Rate Disconnect

Mary Amiti1; Oleg Itskhoki2; Jozef Konings3

1 Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045 (e-mail: ) · 2 Department of Economics, Princeton University, Princeton, NJ 08544 (e-mail: ) · 3 Department of Economics, University of Leuven, Naamsestraat 69, 3000 Leuven, Belgium, National Bank of Belgium, and Department of Economics, University of Ljubljana, Slovenia (e-mail: )

Abstract

Large 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.

DOI
10.1257/aer.104.7.1942
Volume
104
Issue
7
Pages
1942-1978
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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