Exchange Rate Pass-Through to External and Internal Prices: A Developing Country Perspective

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1 Echange Rate Pass-Through to Eternal and Internal Prces: A Developng Country Perspectve M. Nusrate Azz Multmeda Unversty Muhammad Sabbr Rahman Multmeda Unversty Md. Alauddn Maumder Mddle Tennessee State Unversty Somnath Sen Unversty of Brmngham We estmate the echange rate pass-through to eternal and nternal prces of a developng country, specfcally, Bangladesh. The study also eamnes whether the tradton vew that echange rate passthrough should be full for developng countres. We construct some varables whch are not readly avalable n estng databases. A full sample estmaton ndcates that echange rate pass-through to eternal prces s full, however, pass-through to nternal prces s partal. Rollng regressons ndcate that the response of eternal prces to echange rate movement has been constantly around unty untl 23, however, t has fallen rapdly n subsequent years. Response to nternal prces has been found unstable and relatvely small. INTRODUCTION Although there s a growng body of lterature on echange rate pass-through (ERPT), few studes have nvestgated ths ssue for developng countres. Nonetheless, testng ERPT to eternal and nternal prces for developng countres are etremely useful for polcy mplcatons. It s worth clarfyng here that eternal prces nclude both mport and eport prces and nternal prce means domestc prce level, whch s measured by ether consumer prce nde (CPI) or producer prce nde (PPI). Estmatng ERPT to eport prce s necessary to apply an effectve echange rate polcy n those economes whch have been followng an eport-led growth strategy. Generally, the developng countres follow an eport-led growth polcy and they therefore frequently adust the echange rate to fnd compettveness n eport markets. However, f the eportng ndustres of those countres mport ther captal goods, then any ncreased demand for eports mmedately ncreases the demand for captal goods, thereby ncreasng the ependture on mports. So ERPT to mport prce of these economes also need to be nvestgated. These lead us to estmate ERPT to both mport and eport prces. 28 Journal of Appled Busness and Economcs vol. 5(3) 23

2 Secondly, Olve (22), Marazz et al. (25) and Mumtaz et al. (26) ndcate that mport prce s one of the man channels through whch the echange rate affects domestc prces. Subsequently, ERPT to domestc prces s worth estmatng to test whether the 2 nd stage pass-through s sgnfcant for the country. Ths gves an opportunty to eamne whether the echange rate s one of the sgnfcant determnants of nflaton. Besdes, Mshkn (28) and McCarthy (999) suggest that the prce level of an economy may be affected by mport prce pass-through. Moreover, nflaton has become a great concern for Bangladesh economy n recent years. Subsequently, testng the 2 nd stage pass-through may be useful for nflaton-forecastng and monetary polcy targetng (Taylor 2, Marazz et al. 25) for the country. IMF Annual Report (28) ndcates that Bangladesh has been followng the de facto managed floatng echange rate regme. Hence, assumng the managed floatng echange rate regme n Bangladesh, we nvestgate ERPT to both eternal and nternal prces for the country. It s worth notng that even f a country follows the free floatng echange rate regme, the echange rate can be affected by the country s monetary polcy (Mshkn, 28), whch n turn may nfluence eternal and nternal prces. Bangladesh has been pursung an actve echange rate polcy snce ts ndependence n 97, whch s reflected n ts frequent echange rate regme shfts and frequently announced echange rate devaluatons (Islam, 23; Younus et al., 26; Azz, 22). The key obectves of these polces are to reduce the etra pressure of mports, accelerate eports and mprove the balance of trade (Hossan and Alauddn, 25; Fnancal Sector Revew, 26; Azz, 22). Subsequently, eamnng the effectveness of the echange rate s requred to apply approprate polcy. However, Hoque and Razzaque (24) and Chowdhury and Sddque (26) are only studes whch estmate ERPT to eport prce and domestc prces of Bangladesh, respectvely. The earler lterature estmates ERPT to dsaggregated eport prces. Hoque and Razzaque (24) fnd a partal evdence of sgnfcant pass-through to eport prces, whle ERPT to domestc prces s found to be an nsgnfcant phenomenon n Chowdhury and Sddque (26). To the best of our knowledge, none of the studes n the lterature tests ERPT to mport prce of Bangladesh. Ths study attempts to fulfl that vacuum. We estmate ERPT to both eternal and nternal prces at aggregate level. THE LITERATURE Yang (997), Anderton (23), Campa and Goldberg (25), Campa and Mnguez (26), Mumtaz et al. (26), Zorz et al. (27) fnd evdences of ncomplete ERPT to mport prce n developed countres. Mallck and Marques (26) and Zorz et al. (27) also ndcate that there s an ncomplete ERPT to mport prces n developng countres and emergng markets, respectvely. Some studes, for nstance, Dornbusch (987), Olve (22), Marazz et al. (25), Mumtaz et al. (26), Ihrg et al. (26), Mallck and Marques (26) suggests that there s a sustanable fall n ERPT to mport prces over tme. Other studes ncludng Froot and Klemperer (989), Anderton (23), Marazz et al. (25), Campa and Goldberg (25), and Mshkn (28) ndcate that the sze of pass-through coeffcent depend on frms prce settng behavour. That means, the magntude of ERPT coeffcent depends on whether eportng frms set ther product prces n local/consumer currency (LCP) or they follow the producer currency prcng (PCP). Consequently, the success of echange rate polcy (currency devaluaton) to ncrease eports depends on whether the eport prce s rgd n PCP or LCP. If the eport prce follows LCP, then devaluaton cannot ncrease eports. The evdence of ERPT to eport prce s med. Bussère (27), Gagnon and Knetter (995), Knetter (993) and Ohno (989) fnd a partal ERPT to eport prce n developed countres. Vgfusson et al. (27) and Mallck and Marques (26) also fnd a partal support of ERPT to eport prce n mddle ncome countres and developng countres, respectvely. On the contrary, Haque and Razzaque (24) fnd an evdence of full-erpt to eport prces n Bangladesh. Lterature on ERPT to domestc prces has also found a med result. Usng the VAR approach, McCarthy (999) fnds that ERPT to domestc prces s partal n ndustral economes. Zorz et al. (27) also fnd a partal support of ERPT to domestc prces n emergng markets. Zorz et al. (27), Journal of Appled Busness and Economcs vol. 5(3) 23 29

3 therefore, reect the hypothess that ERPT s always hgher n emergng economes compared to ther developed country counterpart. Legh and Ross (22) fnd that ERPT s full n Turkey. However, Chowdhury and Sddque (26) fnd no sgnfcant evdences of ERPT to domestc prces n Bangladesh. We, n lght of the estng research, estmate ERPT to eternal and nternal prces and test whether the pass-through s partal or full n developng countres, partcularly n Bangladesh. Secondly, we eamne whether ERPT has been fallng over tme. Thrdly, we nvestgate whether there s any evdence of prcng-to-market (PTM). Fnally, we test whether ERPT to consumer prces and producer prces are dfferent from each other. The organsaton of the followng sectons s as follows. Secton 3 dscusses data and varables. Secton 4 gves theoretcal bass of emprcal models and methodology of the study. Secton 5 analyses the estmated results. Secton 6 concludes the paper. DATA AND VARIABLES Ths study uses data from varous local and nternatonal sources, namely, Monthly Statstcal Bulletn (MSB) and Foregn Trade Statstcs (FTS) of Bangladesh Bureau of Statstcs (BBS), Internatonal Fnancal Statstcs (IFS) of the Internatonal Monetary Fund (IMF), and the World Development Indcators (WDI) of the World Bank. We used unt prce nde (UPI) for eternal prces. UPI of eports and UPI of mports are collected from varous volumes (972-28) of FTS of BBS. The producer/wholesale prce nde (PPI/WPI) and consumer prce nde (CPI), whch are proes for domestc prces, have been collected from MSB of BBS. It s worth notng that BBS has developed the CPI by usng data of the mddle ncome group from Dhaka cty. Echange rate data are found n the IFS (2) of the IMF, and the constant GDP and world WPI are found n the WDI (2) of the WB. Data for domestc prces are used from However, data for eternal prces are used from It s worth mentonng that the quarterly data for eternal prces are avalable up to 99q4 only. We therefore have faled to use quarterly data n our study. The Nomnal Effectve Echange Rates of Import (NEER m ) and Eport (NEER ) for Bangladesh were constructed by usng the followng formula: NEER t = k = w t E t, where, t s tme and w t s trade-weght of th trade partners at tme t (see Append IA and Append IB). Fgure shows NEERm, NEER, the nomnal echange rate (NEER) and the echange rate wth USdollar (E). We have ncluded data of all maor trade partners to construct the echange rate varable for Bangladesh. NEER and NEERm eplan 77.78% (9 countres) and 76.66% (24 countres) of total eport and mport share of the country, respectvely. Bangladesh manly mports from Inda and Chna, followed by Japan, Sngapore and the USA. The USA s the largest mporter from Bangladesh whch s followed by Germany and the UK. We have not consdered countres whch have less than.5% ndvdual trade share wth Bangladesh, n ths regard. 3 Journal of Appled Busness and Economcs vol. 5(3) 23

4 FIGURE TIME-SERIES OF E, NEER, NEERM AND NEERX MODEL AND METHODOLOGY Three dfferent models are estmated n ths paper whch are eplaned as follows. Import Prce The study employs the benchmark model for mport prce whch s suggested by Campa and Goldberg (22, 25) and Goldberg and Knetter (997). However, we nclude one addtonal varable (the trade openness) wth the estng model. The followng model s estmated emprcally. M ln P t X = α + α ln E t + α 2 ln PC t + α 3 lny t + α 4 OPEN + u t, () M X where P t s the mport prce at tme t, E s NEERm n ths model, PC s producton cost by foregn frm; Y s home GDP (constant); and OPEN s the rato of trade to GDP. α s the coeffcent of nterest, ERPT. Frst-dfference of varables n the model possbly overcomes the non-statonarty problem for relatvely small sample sze. Eport Prce ERPT to eport prce s tested by adustng the model presented n Knetter (995) and Gagnon and Knetter (995). Our benchmark model for eport prces s derved as follows. We know that the dfference between revenue and cost determnes frm s proft. Frm mamzes ts proft, whch s ndcated n the followng equaton- n P = n P Ma P = = ( ) Q Q MC w E w E E,, Journal of Appled Busness and Economcs vol. 5(3) 23 3

5 where (say, Q s demand for from country ; m P ); P s product prce for consumer n ther own currency E P s eport prce; stands for mporter, for eporter, and MC s margnal cost of producton. MC depends on w whch s the domestc nput cost, and w s cost of mported captal goods. We assume that eport demand changes postvely when E changes. Smlarly, MC changes wth E n the postve drecton. Consequently, any change n nput prces (mported captal goods) due to change n echange rate s reflected n the producton cost of frms. The necessary condton for proft mamzaton gves us: P η ( P E) = MC (, η P E) where, η s elastcty of demand for eport. Rasng prce s not an opton for the eporter because f eporter does so, he/she may lose market share. However, deprecaton may gve that opportunty. Logarthm n both sde and the frst order Taylor seres appromaton gve, d ln P d lnη = d ln MC + d ln d ln P d ln E. ( ) P E η By re-organzng, we fnd the testable model for eport prces whch can be wrtten as: d ln P t = µ + ( β ) d ln MC + β d ln E, t t lnη ln where, = η β + ln( η E) ln( P, and µ s a constant. If the prce of mported captal P E) goods w s not affected by the movement of the echange rate, then β gves the magntude of ERPT to eport prces. Ths s n lne of the fndngs n Ohno (989) and Mallck and Marques (26). In fact, the effect of echange rate movements s mpled n MC. β would ndcate whether there s PTM behavour by eporter. If > β >, then ERPT s partal, whch means that eportng frms adust prces n local currency term. If, however, β =, t means that ERPT s full and no adustment s taken place n LCP. Hence, the testable model for ERPT to eport prces s gven as follows. ln t = µ + β ln E t + δ ln PC t + λopen + εt (2) X P X where P t s prce of eports at tme t; E t s pass-through; PC t s producton cost. NEER for Model (2), and β captures the echange rate 32 Journal of Appled Busness and Economcs vol. 5(3) 23

6 Domestc Prces The theoretcal settng of ERPT to consumer and producer prces emerged from the law of one prce (LOP) and the purchasng power party (PPP) concepts. Addtonally, a constant term and an openness varable are ncluded n the model. The model s as follows: ln P d t = µ + β E t + γ P * ln ln t + λopen + εt, (3) d * where P t s domestc prce; E t s NEER; and Pt s foregn prces. β s the pass-through coeffcent. It s worth mentonng that f the pass-through s complete, (.e., β = ) and all other coeffcents become zero then t wll ndcate that the PPP holds between Bangladesh and ts trade partners. Ths study estmates all emprcal models (Model, Model 2 and Model 3) usng OLS. We also employ the rollng regressons technque to capture any sgnfcant varaton n ERPT over tme. ESTIMATED RESULTS Estmated results are reported n Table. Ths table shows that ERPT to mport prce s +.73, whch s statstcally sgnfcant. Ths ndcates that a one percent devaluaton ncreases the mport prce by.73 2 percent. Consequently, mport falls. The R s not large because we have used some proy varables such as, world-wpi and domestc real GDP n Model. These varables are not found statstcally sgnfcant. Moreover, PPI of some maor trade partners of Bangladesh such as Germany, Chna, UAE, France, Malaysa, Hong Kong, Italy, and Saud Araba are not avalable n estng datasets. It s worth mentonng here that we have used the weghted foregn prce nde (WFPI) as a proy for foregn producton cost. However, t cannot make any sgnfcant dfference n estmated results. Besdes, a large number of mported goods of Bangladesh are necessary goods and they are nelastc to ncome (Azz, 22). It can also be noted here that Vgfusson et al. (27) and Marazz et al. (25) have also 2 eperenced small R values n ther ERPT model. ERPT to eport prce s -.9, whch s found to be sgnfcant. The negatve sgn ndcates that f there s a devaluaton of currency, eport prce of Bangladesh products sgnfcantly decreases. Consequently, the demand for eport ncreases. Hence, devaluaton s found to be an effectve polcy for eport compettveness of Bangladesh products. ERPT to domestc prces are +.59 (CPI) and +.62 (PPI), respectvely. They are found to be postve and sgnfcant. These ndcate that f there s a devaluaton of currency, nflaton ncreases. Ths passthrough s also called second-stage pass-through. Hence, the echange rate s found to be a sgnfcant determnant of nflaton n Bangladesh. Journal of Appled Busness and Economcs vol. 5(3) 23 33

7 TABLE EXCHANGE RATE PASS-THROUGH TO EXTERNAL AND INTERNAL PRICES Varables ln E t lny t Import Prces (978 27).73** (.345) -.32 (.328) ln P t - Coeffcents (standard error n parenthess) Consumer Eport Prces Prces (974- (978 27) 26) -.92*** (.297).59*** (.94) Producer Prces (974-26).62*** (.97) *** (.39) - - ln P t *.33 (.247) -.47** (.72).47** (.78) OPEN -. (.7). (.7) -.2*** (.3) -.4*** (.3) Cons. -.7 (.85).7 (.32).8 (.22). (.23) 2 R F test.9 6.7*** 22.23*** 22.66*** DW Note: ***, **, and * ndcate sgnfcance at the %, 5% and % levels, respectvely. E s NEERm for mport, NEER for eport and NEER for domestc prces. The Breusch-Godfrey Seral Correlaton LM Test confrms that there s no autocorrelaton. The Whte Heteroskedastcty Test suggests that there s no heteroskedastcty. The CUSUM test ndcates that there s no structural break n data. The Jarque-bera test affrms that the error s normally dstrbuted. t Complete or Partal Pass-Through We test whether ERPT to mport prce s full or partal (.e., the unt coeffcent of the echange rate). The test result (TABLE 2) ndcates that ERPT to mport prce s full. It ndcates that there s no PTM behavour n Bangladesh mports. Ths may be because eporters are not much concerned about ther market share n Bangladesh. We also test whether ERPT to eport prce s full. We could not reect the hypothess. Ths mples that ERPT to eport prce s also full. Hoque and Razzaque (24) also fnd smlar results at commodty specfc ERPT to eport prces. Fnally, we test whether ERPT to nternal prces are full. Unlke eternal prces pass-through, we fnd that ERPT to nternal prces are only partal. Hence, the conventonal wsdom that ERPT should be complete n developng countres s found approprate for eternal prces but not for nternal prces. The reecton of full-erpt to domestc prces also ndcates that the PPP, between Bangladesh and ts trade partners, does not hold. 34 Journal of Appled Busness and Economcs vol. 5(3) 23

8 TABLE 2 SUMMARY OF FULL AND PARTIAL EXCHANGE RATE PASS-THROUGH Echange Rate Passthrough to Null Hypothess T-Statstc Crtcal Values : = Import Prces H α -.79 Eport Prces H : β =.296 Consumer Prces H : β = (%) 2.48 (5%) (%) 2.48 (5%) (%) 2.42 (5%) Producer Prces H : β = (%) 2.48 (5%) The Rollng Regressons We then run rollng regressons to eamne whether there s any sgnfcant varaton n ERPT over tme. The study employs the baselne Model (2) for eport and Model (3) for consumer prces. The study, however, has not employed the entre Model () for mport prce pass-through. Ths s because frstly, most of Bangladesh mports are nelastc to ncome (Azz, 22). Secondly, although world-wpi s a proy for cost of producton (for foregn frm) n our model, the maorty mports of Bangladesh come from a small set of trade partners. An eghteen-year wndow for each regresson s used. Fgure 2 ndcates that response of eport prce to echange rate movement has been negatve and sgnfcant untl 23. Pass-through s consstently around one tll 23 and t has fallen n later years. It can be noted that we use both 95 percent and 9 percent confdence ntervals. FIGURE 2A ROLLING REGRESSIONS FOR ERPT TO EXPORT PRICES (CI = CONFIDENCE INTERVAL) Rollng Regressons for the NEER Pass-through to Eport Prces (95% CI) Journal of Appled Busness and Economcs vol. 5(3) 23 35

9 FIGURE 2B ROLLING REGRESSIONS FOR ERPT TO EXPORT PRICES Rollng Regressons for the NEER Pass-through to Eport Prces (9% CI) Fgure 3 shows the rollng regressons for ERPT to mport prce whch ndcate that ERPT has been complete untl 2 and t has fallen gradually after 2. FIGURE 3A ROLLING REGRESSIONS RESULTS FOR ERPT TO IMPORT PRICES Rollng Regressons for the NEERm Passthrough to Import Prces (95% CI) Journal of Appled Busness and Economcs vol. 5(3) 23

10 FIGURE 3B ROLLING REGRESSIONS RESULTS FOR ERPT TO IMPORT PRICES Rollng Regresson for the NEERm Pass-through to Import Prces (9% CI) Unlke ERPT to eternal prces, ERPT to nternal prces are found unstable over tme. Fgure 4 shows that ERPT s partal for nternal prces whch has been around.6 untl 993, and t has fallen to about.3 (Fgure 4a, Fgure 4b, Fgure 4c and Fgure 4d) after 993. We also fnd that trade openness s a sgnfcant determnant of nternal prces n Bangladesh. FIGURE 4A ROLLING REGRESSIONS FOR ERPT TO CONSUMER PRICES Rollng Regressons for the NEER Pass-through to Consumer Prces (95% CI) Journal of Appled Busness and Economcs vol. 5(3) 23 37

11 FIGURE 4B ROLLING REGRESSIONS FOR ERPT TO CONSUMER PRICES Rollng Regressons for the NEER Pass-through to Consumer Prces (9% CI) FIGURE 4C ROLLING REGRESSIONS FOR ERPT TO PRODUCER PRICES Rollng Regressons for NEER Pass-through to Producer Prces (95% CI) Journal of Appled Busness and Economcs vol. 5(3) 23

12 FIGURE 4D ROLLING REGRESSIONS FOR ERPT TO PPI Rollng Regressons for NEER pass-through to Producer Prces (9% CI) Year CONCLUSION Ths study estmates the echange rate pass-through to eternal and nternal prces of Bangladesh. Nomnal effectve echange rate varables, whch are not readly avalable n estng databases, are constructed for the estmaton. We test the hypothess that unlke developed countres, ERPT should be full for developng countres. We also eamne whether trade lberalzaton has a sgnfcant effect on eternal and nternal prces. Fnally, we estmate rollng regressons to depct the responses of eternal and nternal prces to echange rate movements over tme. Estmated results ndcate that ERPT to eternal prces (.e., mport and eport prces) are statstcally sgnfcant and full. However, ERPT to nternal prces (.e., consumer and producer prces) are found to be partal. Trade lberalzaton s found to be a sgnfcant determnant of nternal prces. Rollng regressons demonstrate that responses of eternal prces to echange rate movement have been sgnfcant and consstently one untl 23. However, ths pass-through has fallen consderably n subsequent years. Ths fndng s n accordance wth the evdence reported by Marazz et al. (25) and Frankel et al. (25). The responses of nternal prces to echange rate movement, however, are relatvely small and unstable n Bangladesh. We have not found any evdence of prcng-to-market behavour n mport and eport of Bangladesh. There s no evdence of PPP between Bangladesh and ts trade partners ether. The theoretcal predcton about the complete echange rate pass-through n developng countres cannot be reected when we take the eternal prces nto consderaton. However, we reect ths theoretcal predcton when we take the nternal prces nto account. No sgnfcant dfference s found between echange rate pass-through to consumer prce and producer prce. ENDNOTE. Echange rate pass-through to mport prce s consdered as the frst stage pass-through because the echange rate drectly affects the mport prces. We know that CPI (basket) ncludes both domestc and Journal of Appled Busness and Economcs vol. 5(3) 23 39

13 mported products. Hence, domestc prce may be affected by the mport prces. Echange rate passthrough to domestc prces are therefore called the second stage pass-through. REFERENCE Anderton, Bob (23), Etra-EURO Area Manufacturng Import Prces and Echange Rate Pass- Through, Workng Paper No. 29, European Central Bank. Asan Development Bank (26), Asan Development Outlook 26 Update, p.47. Azz, M. N., (22), Does A Real Devaluaton Improve the Balance of Trade? Emprcs from Bangladesh Economy, Journal of Developng Areas, 46 (2): 9-4. Bussère, M (27), Echange Rate Pass-Through to Trade Prces: The Role of Non-lneartes and Asymmetres, Workng Paper Seres, No 822/ October 27. Campa, Jose Manuel and Goldberg, Lnda S. (25), Echange Rate Pass-Through nto Import Prces, The Revew of Economcs and Statstcs, 87(4): Campa Jose Manuel and Mnguez, Jose M.G. (26), Dfferences n echange rate pass-through n the euro area, European Economc Revew, 5: Chowdhury, M. Islam and Sddque, S. Fahad (26), Echange Rate Pass-Through n Bangladesh, Workng Paper Seres No. WP 67, Polcy Analyss Unt, Bangladesh Bank. Dornbusch, Rudger (987), Echange Rates and Prces, Amercan Economc Revew, 77: Frankel, J., Parsley, D. and Jn-We Shang (25), Slow Pass-through Around the World: A New Import for Developng Countres?, Center for Internatonal Development at Harvard Unversty Workng Paper No. 6. Froot, Kenneth A. and Klemperer, Paul D. (989), Echange Rate Pass-Through When Market Share Matters, The Amercan Economc Revew, 79(4): Gagnon, E. Joseph and Knetter M. Mchael (995), Markup adustment and echange rate fluctuatons: evdence from panel on automoble eports, Journal of Internatonal Money and Fnance, 4(2): Hossan, Mohammad A. and Alauddn, Mohammad (25), Trade Lberalzaton n Bangladesh: The Process and Its Impact on Macro Varables Partcularly Eport Epanson, Journal of Developng Areas, 39(). Haque, M. Manul and Razzaque A. (24), Echange Rate Pass-Through n Bangladesh s Eport Prces: An Emprcal Investgaton, The Bangladesh Development Studes, Vol.XXX, March-June 24, Nos. &2. Hooper, P. and Mann, C. L. (989), Echange Rate Pass-through n the 98s: The case of U.S. Imports of Manufacturers, Brookng Papers of Economc Actvty,. 4 Journal of Appled Busness and Economcs vol. 5(3) 23

14 Ihrg, Jane E., Marazz, Maro, and Rothenberg, Aleander D. (26), Echange Rate Pass-Through n the G-7 countres, Internatonal Fnance Dscusson Papers, Number 85, Board of Governors of the Federal Reserve System. Islam, Mrza Azzul (23), Echange Rate Polcy of Bangladesh: Not Floatng Does not Mean Snkng, Occasonal Paper Seres (January 23), Centre for Polcy Dalogue (CPD), Bangladesh. Kltgaard, Thomas (999), Echange Rates and Proft Margns: The Case of Japanese Eporters, Economc Polcy Revew, Vol. 5 Issue, p 4. Knetter, Mchael M. (993), Internatonal Comparsons of Prcng-to-Market Behavor, The Amercan Economc Revew, 83(3): Knetter, M. Mchael (995), Prcng to Market n Response to Unobservable and Observable Shocks, Internatonal Economc Journal, 9(2). Krugman Paul (986), Prcng to Market When the Echange Rate Changes, Workng Paper No. 926, NBER Workng Paper Seres. Legh, Danel and Ross, Marco (22), Echange Rate Pass-Through n Turkey, IMF Workng Paper, WP/2/24. Mallck, Sushanta and Marques, Helena (26), Sectoral Echange Rate Pass-Through: Testng the Impact of Polcy Reforms n Inda, Scottsh Journal of Poltcal Economy, 53(2). Mann, Catherne L. (986), Prces, proft margns, and echange rates, Federal Reserve Bulletn, June: Marazz, M., Sheets, N. and Vgfusson, R. (25), Echange Rate Pass-Through to U.S. Import Prces: Some New Evdence, Board of Governors of the Federal Reserve System, Internatonal Fnance Dscusson Papers, Number 833. McCharthy, Jonathan (999), Pass-Through of Echange Rates and Import Prces to Domestc Inflaton n Some Industralzed Economes, Bank for Internatonal Settlements (BIS) workng paper no. 79, Monetary and Economc Department, Swtzerland. Mshkn, Frederc S. (28), Echange Rate Pass-Through and Monetary Polcy, Workng Paper 3889, the NBER. Mumtaz, Haroon; Özlem, Onmen; and Wang, Jan (26), Echange rate pass-through nto UK mport prces, Workng Paper no. 32, Bank of England. Ohno, Kench (989), Eport Prcng Behavor of Manufacturng: A U.S.-Japan, IMF Staff Paper, 36(3). Olve, Govann P. (22), Echange Rates and the Prces of Manufacturng Products Imported nto the Unted States, New England Economc Revew, Jan/Feb22: 3-8. Parsons, Crag R. and Sato, Kyotaka (27), New Estmates of Echange Rate Pass-Through n Japanese Eports, Workng Paper: WP 27-2, Centre for Internatonal Trade Studes (CITS), Faculty of Economcs, Yokohama Natonal Unversty, Japan. Journal of Appled Busness and Economcs vol. 5(3) 23 4

15 Taylor, John B. (2), Low nflaton, Pass-Through and the Prcng Power of Frms, European Economc Revew, 44: Internatonal Monetary Fund (28), Annual Report, 28, the IMF. Vgfusson, Robert J., Sheets, Nathan and Gagnon, Joseph (27), Echange Rate Pass-Through to Eport Prces: Assessng Some Cross-Country Evdence, Internatonal Fnance Dscusson Papers No. 92, Board of Governors of the Federal Reserve System. Yang, Jawen (997), Echange Rate Pass-Through n U.S. Manufacturng Industres, The Revew of Economcs and Statstcs, 79(): Younus, S. and Chowdhury, M. I., (26), An Analyss of Bangladesh s Transton to Fleble Echange Rate Regme, Workng Paper Seres No: WP 76, Polcy Analyss Unt (PAU), The Bangladesh Bank. Zorz, Mchele C., Hahn, E. and Sanchez, M. (27), Echange Rate Pass-Through n Emergng Markets, Workng Paper Seres, European Central Bank, No APPENDIX IA TRADE-SHARE AND TRADE-WEIGHT (%) FOR IMPORT OF BANGLADESH Countres Weght (%) for each country Bangladesh mport-share (%) Australa Canada Chna Denmark France Germany Hong Kong Inda Indonesa Italy.5.89 Japan Korea Kuwat Malaysa Netherlands.7.3 Pakstan.57.2 Saud Araba Sngapore Sweden.8.83 Swtzerland.52.6 Thaland UAE UK USA Total Journal of Appled Busness and Economcs vol. 5(3) 23

16 APPENDIX IB TRADE-SHARE AND TRADE-WEIGHT (%) FOR EXPORT OF BANGLADESH Countres Weghts (%)for each country Bangladesh Eport-share (%) Australa Belgum Canada Chna.9.7 Denmark.7.9 France Germany Hong Kong Inda.5.7 Italy Japan Netherlands Pakstan Sngapore.34.5 Span Sweden Swtzerland UK USA Total Journal of Appled Busness and Economcs vol. 5(3) 23 43