Trade and Development Review, Vol 4, No 1 (2011)

Exchange Rate Pass-Through and India's Export Prices

Saikat Sinha Roy, Pradyut Kumar Pyne

Abstract


This paper estimates exchange rate pass-through to India’s export prices during 1960-2000. In the literature, exchange rate pass-through is mostly found to be incomplete. In this study we develop a simultaneous equation demand-supply model of export determination along the lines of an imperfect substitute model to estimate pass-through both at aggregate and disaggregate manufactured exports. This is done using the best possible econometric technique and a time comparable dataset. The study shows high, but incomplete, exchange rate pass-through into India’s aggregate export prices. The degree of exchange rate pass-through is found to vary across product groups.


Full Text: PDF