LOW EXCHANGE RATE PASS - THROUGH IN THE UNITED STATES, ECONOMY - WIDE AND IN AGRICULTURE
https://doi.org/10.21686/2410-7395-2023-2-22-37
Abstract
We provide evidence of low pass-through of exchange rates into domestic prices in the United States, both within agriculture and economy-wide, from 1970 to 2022. Exchange rate pass-through is defined as the extent to which a change in exchange rates translates into a change in domestic prices. We revisit the question of exchange rate pass-through into domestic producer and consumer prices. With food inflation being one of the major areas of concern, and with trade playing a disproportionately important role in U.S. agriculture , we also investigate exchange rate pass-through for agricultural prices as well as for prices in the general economy. Our estimation strategy does not use cross-sectional variation, but instead exploits variation over time in exchange rate indices and price indices. Most of our estimates of pass-through are not significantly different from zero, and we are almost uniformly able to reject the hypothesis of complete pass-through. Our findings suggest that any further increases in the value of the U.S. dollar will have little effect on inflation rates in the United States, in agriculture or economy-wide.
About the Authors
W. Zeng
United States Department of Agriculture
United States
United States
Wendy Zeng
Economic Research Service
MO 64105
805 Pennsylvania Ave.
Kansas City
W. Johnson
United States Department of Agriculture
United States
United States
Will Johnson
Economic Research Service
MO 64105
805 Pennsylvania Ave.
Kansas City
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Review
For citations:
Zeng W., Johnson W. LOW EXCHANGE RATE PASS - THROUGH IN THE UNITED STATES, ECONOMY - WIDE AND IN AGRICULTURE. International Trade and Trade Policy. 2023;9(2):22-37. https://doi.org/10.21686/2410-7395-2023-2-22-37
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