Product-level estimates of exchange rate pass-through: evidence from Turkey

Official URL: http://dx.doi.org/10.1111/twec.13060

We estimate the export and import pass-through rates using product-level data from Turkey. We find that the Turkish lira (TRY) exchange rate changes are mostly passed on to TRY prices of exports and imports—and, therefore, modestly to their prices in trading partners' currencies. The rate of average pass-through to TRY prices is estimated at 89% for imported goods and 82% for exported goods, with no apparent lags in the impact. Pass-through estimates by sector show variation and are relatively low for food and agricultural products. We argue that the fine-grained product-level data enable us to estimate the pass-through rates with better reliability and precision than we could by using only aggregated time-series data. We also introduce a pooled equation to estimate the difference between the export and import pass-through rates—a potentially useful statistic—in a way that allows for statistical inference.