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Importers, Exporters, and Exchange Rate Disconnect

Author(s): Amiti, Mary; Itskhoki, Oleg; Konings, Jozef

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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.
Publication Date: Jul-2014
Citation: Amiti, Mary, Itskhoki, Oleg, Konings, Jozef. (2014). Importers, Exporters, and Exchange Rate Disconnect. American Economic Review, 104 (7), 1942 - 1978. doi:10.1257/aer.104.7.1942
DOI: doi:10.1257/aer.104.7.1942
ISSN: 0002-8282
Pages: 1942 - 1978
Type of Material: Journal Article
Journal/Proceeding Title: American Economic Review
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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