Exchange Rates and Prices

This text provides an in-depth analysis of the relationship between exchange rates and the prices of internationally traded goods, using Australian imports of manufactures as a case study. The study is conducted in two stages: exchange rate pass-through elasticites are estimated by applying an econometric procedure which avoids the pitfalls in previous studies to a unique data set comprising 50 product categories; and the determinants of pass-through are investigated within a model which accounts for market structure, product differentiation, non-tariff barriers and the pricing practices of multinational corporations. Separate chapters provide reviews of the theory and evidence on pass-through and developments in time-series econometrics.