Measuring export prices

This article describes and compares the three most popular indices that are used to measure export prices – Wholesale Price Indices, unit value indices, and export price indices. It includes a brief discussion of the methodology used in constructing the different types of price indices and the relative merits of each, as well as a review of the relevant literature. Two of these price measures, Wholesale Price Indices and unit value indices, are used to analyze the “pass-through” question. A proper measurement of the extent to which exporters pass-through the price effects of changes in exchange rates in the prices they charge their foreign customers is essential to an understanding of (1) export pricing behavior of individual industry sectors when exchange rates fluctuate and (2) the impact of exchange rate changes on a country’s trade balance.