The Empirical Range of Pass-Through in US, German and Japanese Macrodata

This paper compares the empirical range of aggregate exchange rate pass-through in the US, Germany and Japan during the 1980s and the1990s. Our main contribution is to focus on monthly data, to better account for real-world price level stickiness and exchange rate volatility. Another import is that we take robustness seriously and obtain our results employing a battery of alternative specifications, including notably generalized VARs. We find that, first, pass-through on import prices has considerably declined in the 1990s relative to the 1980s, pass-through on export prices has not changed much and pass-through on consumer prices seems to be nowadays practically negligible in all three countries we considered. Second, the econometric method, variable proxy and data frequency used matter for the precise magnitudes and time patterns, yet they often accord on the general trends; our emphasis on monthly series has, however, uncovered a common profile of short-run pass-through dynamics which remains hidden in quarterly observations. Third, the US is quite a particular economy, with import and, hence, consumer price level