Abstract
We analyze the channels through which the Exchange rate affects final consumer prices. We compare advanced countries with one emerging economy, Brazil, to determine the corresponding exchange rate pass-through and its channels. A key aspect to the exchange rate pass-through is the relative importance of tradables in the consumption
basket as well as the share of imported inputs. Since non-tradables are usually cheaper in developing economies, the share of non-tradeables is smaller in theses countries. We illustrate this scenario using data from Brazil vis-a-vis a group of advanced economies.
Keywords:
Exchange rate; pass through; import prices; globalization; consumer price index; cpi