Import Prices and Invoice Currency: Evidence From Chile
42 Pages Posted: 17 Jun 2019
Date Written: June 4, 2019
Abstract
We use transaction-level customs data to document that a large majority of Chilean imports are invoiced in dollars regardless of country of origin and sector. We study the implications of this fact for the determination of exchange rate pass-through (ERPT) to border prices. We find that the special role of the dollar in international trade has real effects, but bilateral exchange rates with respect to exporter currencies also matter in the medium-term. In particular, exchange rate fluctuations against the dollar account for most of the ERPT in the short run and are still relevant after two years. However, the cumulative ERPT with respect to the exporter country's currency increases with time and after two years accounts for most of the ERPT to border prices.
Keywords: invoice currency, exchange rate pass-through
JEL Classification: F3, F4
Suggested Citation: Suggested Citation