2020/09/07 by Hakan Yilmazkuday · 1 voice · 2 citations
Economics, Econometrics and Finance · #Economic theories and models #Fiscal Policy and Economic Growth #Monetary Policy and Economic Impact
paper · doi:10.1017/s1365100520000358
openalex publication_date 2020/09/07 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/03
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.