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Puey Ungphakorn
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Call for Papers: PIER Research Workshop 2025
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Discussion Paperdp
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Year
2025
2024
2023
2022
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23 November 2021
20211637625600000
No. 167

Heterogeneity in Exchange Rate Pass-through to Import Prices in Thailand: Evidence from Micro Data

Abstract

We use transaction-level customs data and show that there is significant heterogeneity in exchange rate pass-through (ERPT) to import prices at the Thai border. Our findings uncover significant variations in ERPT across time as well as across disaggregated sectors. By studying several structural determinants of ERPT, we find that (i) prices of homogenous goods are more sensitive to exchange rate changes compared to differentiated goods; (ii) firms with a higher degree of market power face lower ERPT; and (iii) ERPT crucially hinges upon the currency of invoice in the trade transaction. For goods invoiced in a foreign currency, the effect of ERPT is significantly higher than those priced in Thai baht. We also find that for the large majority of Thai imports that are invoiced in the US dollar under the dominant currency pricing (DCP) paradigm, price responses to the US dollar are much higher than those associated with the bilateral exchange rate vis-à-vis the exporters' currency, but only in the short run. In the medium run, both exchange rates become equally relevant. Finally, by investigating state-dependent properties of ERPT, we find that while Thai import prices are equally sensitive to small versus large exchange rate changes, the degree of pass-through is stronger during episodes of depreciations rather than appreciations, particularly for goods that practice DCP.

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JEL: E31F14F31L11
Tags: invoice currencyexchange rate pass-throughdirectional asymmetrydifferentiated productsfirm market powerlocal currency pricingproducer currency pricingdominant currency pricing
The views expressed in this workshop do not necessarily reflect the views of the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand.
Tosapol Apaitan
Tosapol Apaitan
Bank of Thailand
Pym Manopimoke
Pym Manopimoke
Bank of Thailand
Nuwat Nookhwun
Nuwat Nookhwun
Puey Ungphakorn Institute for Economic Research
Jettawat Pattararangrong
Jettawat Pattararangrong
Puey Ungphakorn Institute for Economic Research

Puey Ungphakorn Institute for Economic Research

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Phone: 0-2283-6066

Email: pier@bot.or.th

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