The Degree and Determinants of Exchange Rate Pass-Through: Market Structure, Non-Tariff Barriers and Multinational Corporations

This study investigates the exchange rate pass-through (PT) for Australian imports of manufactures. PT elasticities are estimated for total manufactures and 40 product categories by applying an econometric procedure which avoids the pit-falls in previous studies to a carefully assembled data set. The determinants of PT are analysed by relating the PT elasticities to variables representing foreign control, non-tariff barriers (NTBs), product characteristics and market structure. We find that PT is incomplete for most products, with significant variation across products. Unlike previous studies, we find that most of the variation in PT is explained by the presence of multinational corporations and NTBs.