Exchange Rate Pass-Through : Evidence from Aggregate Japanese Exports

It has been suggested that recent findings of a decline in aggregate exchange rate pass-through are due to changes in demand elasticities within the U.S., or to changes in competitive (supply) conditions in for those imports. An alternate explanation is that the commodity composition of U.S. imports has shifted in such a was as to change the overall pass-through. Evidence supportive of this conjecture is presented. We find, using sectoral level volume and import prices of imports from Japan, that U.S. imports are now more heavily concentrated in those sectors with traditionally low pass-through, whereas individual sector passthrough estimations are stable throughout the sample