Working Paper: NBER ID: w2453
Authors: Robert C. Feenstra
Abstract: This paper examines the effect of tariffs and exchange rates on U.S. prices of Japanese cars, trucks and motorcycles. In particular, we test whether the long run pass-through of tariffs and exchange rates are identical: the symmetry hypothesis. We find that this hypothesis is easily accepted in our sample. We also find that the pass-through relation varies across products, ranging from about 0.6 for trucks to unity for motorcycles. These coefficients have very different implications for trade policy. We explain the results based on demand, cost and institutional conditions in each industry. We also find weak evidence that the pass-through of exchange rates has fallen in more recent years.
Keywords: tariff; exchange rate; passthrough; automobile
JEL Codes: 422; 431
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tariffs (F13) | consumer price of imports (F14) |
| exchange rates (F31) | consumer price of imports (F14) |
| exchange rates (F31) | passthrough of tariffs to consumer prices (H22) |