Sticky Borders

The stickiness and currency of pricing of traded goods play a central role in international macroeconomics, however empirical evidence on these features is seriously limited. To address this we use microdata on U.S. import and export prices at-the-dock for the period 1994-2005, and present four main results: First, the median price duration in the currency of pricing is 10.6 (12.8) months for imports (exports). Second, 90% (97%) of imports (exports) are priced in dollars. Consequently, contrary to standard modeling assumptions, for the U.S, there is producer currency pricing in exports and local currency pricing in imports. Third, import price rigidity has increased by 10 percentage points, with increasing rigidity in differentiated goods prices. Fourth, even conditioning on a price change, exchange rate pass-through into U.S. import prices is low, at 22%.