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- Title
UNEQUAL EXCHANGE RATE PASS-THROUGH ACROSS INCOME GROUPS.
- Authors
Yilmazkuday, Hakan
- Abstract
Exchange rate pass-through (ERPT) into prices and into income loss are shown to be enough to calculate ERPT into welfare loss using implications of a simple model. These ERPT measures are estimated at the good level using a unique micro-price data set from Turkey, and they are combined with income-group-specific expenditure shares at the good level to obtain aggregate-level ERPT measures for alternative income groups. An exchange rate shock resulting in a real depreciation of 1% is shown to decrease welfare by about 0.80% for the average-income consumer, while this estimate ranges between 0.73% and 0.83% for consumers in the lowest- and highest-income quintiles, respectively, suggesting evidence for redistributive effects of an exchange rate shock. Using micro prices has further resulted in showing that traded, nondurable, flexible-price, or income-elastic goods contribute more to ERPT into welfare loss for the average-income consumer, suggesting important policy implications for filtering out the noise in the measurement of aggregate-level prices.
- Subjects
TURKEY; EXCHANGE rate pass-through; FOREIGN exchange rates; NOISE measurement
- Publication
Macroeconomic Dynamics, 2022, Vol 26, Issue 3, p682
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100520000358