Faculty of Business and Law
SCHOOL OF ACCOUNTING, ECONOMICS AND FINANCE
School Working Paper - Economic Series 2007
SWP 2006/17
Exchange Rate Pass-Through and Relative Prices:
An Industry-Level Empirical Investigation
Prasad S. Bhattacharya, Cem A. Karayalcin and
Dimitrios D. Thomakos
The working papers are a series of manuscripts in their draft form. Please do not quote
without obtaining the author’s consent as these works are in their draft form. The views
expressed in this paper are those of the author and not necessarily endorsed by the School.
Exchange Rate Pass-Through and Relative Prices:
An Industry-Level Empirical Investigation♣
by
Prasad S. Bhattacharya+, Cem A. Karayalcin∗ and Dimitrios D. Thomakos♠
Abstract
In this paper we explore the extent of exchange rate pass-through for the USA, UK and Japan
using a post-Bretton Woods industry-level dataset. We investigate how different channels of
exchange rate pass-through affect domestic and import prices. Our analysis is suggestive of two
channels of transmission and we find considerable variation in the extent of pass-through across
industries and countries.
JEL Classifications: F0, F31, F32, F41.
Keywords: Exchange Rates, Pass-Through Effect, Expenditure-Switching.
♣ An earlier version of this paper was presented at the 9th International Conference on Computing in
Economics and Finance in Seattle and at Florida International University. We would like to thank two
anonymous referees and the conference and seminar participants for useful comments and suggestions. The
programs and the data used in the paper are available upon request. All remaining errors are our
responsibility.
+ School of Accounting, Economics and Finance; Faculty of Business and Law; Deakin University,
Melbourne Campus at Burwood; Burwood, Victoria 3125; Australia. E-mail: prasbhat@deakin.edu.au
∗ Correspondin