Price change dispersion and time-varying pass-through to consumer prices

Rita Fleer, Dr. Barbara Rudolf and Mathias Zurlinden

Issue
2016-17

Pages
43

JEL classification
E30, E31, F31

Keywords
Exchange rate pass-through, heterogeneity, aggregate implications of price change dispersion

Year
2016

This paper examines the relationship between the dispersion of changes in prices and the medium-run exchange rate pass-through in Swiss data. The prices considered are the elementary indices that form the basic building blocks for the construction of the CPI. The results indicate that uctuations in the crosssectional dispersion of changes in these price indices inform about variation in aggregate pass-through at business cycle frequencies. Because these data are readily available at monthly frequencies, they can be used in real time to help gauge the pass-through of exchange rate changes to retail prices.