This paper assesses whether partial exchange rate pass-through to trade prices has important implications for the prospective adjustment of global external imbalances. To address this question, we develop and estimate an open-economy DGE model in which pass-through is incomplete due to the...

Over the past twenty years, U.S. import prices have become less responsive to the exchange rate. We propose that a significant portion of this decline is a result of increased trade integration. To illustrate this effect, we develop an open economy DGE model in which trade occurs along both the...

This paper documents a sustained decline in exchange rate pass-through to U.S. import prices, from above 0.5 during the 1980s to somewhere in the neighborhood of 0.2 during the last decade. This decline in the pass-through coefficient is robust to the measure of foreign prices that is included...

A large body of empirical work has found that exchange rate movements have only modest effects on inflation. However, the response of an import price index to exchange rate movements may be underestimated because some import price changes are missed when constructing the index. We investigate...

The closed and open economy literatures both work on evaluating the role of real rigidities, but in parallel. This paper brings the two literatures together. We use international price data and exchange rate shocks to evaluate the importance of real rigidities in price setting. We show that,...

Remarks by President Dudley at the Foreign Policy Association Corporate Dinner, New York City.

We develop a theoretical model of international trade pricing in which individual exporters and importers bargain over the transaction price and exposure to exchange rate fluctuations. We find that the choice of price and invoicing currency reflects the full market structure, including the...

The failure of the dollar's depreciation to narrow the U.S. trade deficit has driven recent research showing that the transmission of exchange rate changes to import prices has declined sharply in industrial countries. Estimates presented in this study, however, suggest that "pass-through" to...

Despite the dollar’s real depreciation in the past few years, the U.S. trade deficit has continued to increase, with the level of imports reaching record highs. Why has the cheaper dollar not made imports more expensive and exports more attractive and, in turn, reduced the trade deficit? ;...

In this paper, we use cross-country and time-series evidence to argue that retail price sensitivity to exchange rates may have increased over the past decade. This finding applies to traded goods as well as to non-traded goods. We highlight three reasons for the change in pass-through into the...