CPI Exchange Rate Pass-Through Decomposition and Distribution Margins: The Case of Brazil versus Advanced Economies

Abdelmalack, Camila Ciss; Campos, Camila F. S.

doi:10.5935/0034-7140.20200001

Camila Ciss Abdelmalack camilaciss@hotmail.com

CM Capital. Rua Gomes de Carvalho, 1195, 4º andar, São Paulo, SP, Brasil.

http://orcid.org/0000-0001-7884-9117

Camila F. S. Campos camilafsc@insper.edu.br

Insper. Rua Quatá, 300, Vila Olímpia, São Paulo, SP, CEP 04546-042, Brasil.

http://orcid.org/0000-0002-3628-0919

camilaciss@hotmail.com

camilafsc@insper.edu.br

Country	Year	Average Distr. Margin
Australia	2000/2001	21.4
France	2000	19.4
Germany	2000	15.1
Portugal	1999	14.8
USA	1997	23.9
Brazil	2000	12.9

Country	Year	Imports to Tradables	Tradables to Consumption	Share of Imported Inputs Tradables	Share of Imported Inputs Non-Tradables
Australia	2000/01	0.27	0.31	0.18	0.09
France	2000	0.24	0.38	0.2	0.08
Germany	2000	0.33	0.36	0.27	0.09
Portugal	1999	0.45	0.42	0.37	0.14
USA	1997	0.20	0.25	0.10	0.03
Brazil	2000/09	0.18	0.47	0.12	0.03

Country	Year	CPI Elasticity	Imported Inputs	Consumption of Imports
Australia	2000/01	0.17	75	25
France	2000	0.19	71	29
Germany	2000	0.21	70	30
Portugal	1999	0.33	62	38
USA	1997	0.08	59	41
Brazil	2000/09	0.14	49	51

Country	Year	CPI Elasticity	Imported Inputs	Consumption of Imports
Australia	2000/01	0.21	0.81	0.19
France	2000	0.21	0.75	0.25
Germany	2000	0.24	0.75	0.25
Portugal	1999	0.36	0.65	0.35
USA	1997	0.09	0.65	0.35
Brazil	2000/09	0.15	0.55	0.45

	Actual	Δα	Δα_t	Δδ_h + Δδ_n
α	0.42	0.20	0.42	0.42
(1 - α_t)	0.45	0.45	0.30	0.45
δ_n	0.14	0.14	0.14	0.03
δ_h	0.37	0.37	0.37	0.20
γ	0.148	0.148	0.148	0.148
η _P	0.36	0.26	0.33	0.23
% Imported Inputs	0.52	0.69	0.65	0.30
% Imported Consumption	0.48	0.31	0.35	0.70

	Actual	Δα	Δα_t	Δδ_h	Δδ_n	Δδ_h + Δδ_h
α	0.30	0.47	0.30	0.30	0.30	0.30
(1 - α_t)	0.24	0.24	0.55	0.24	0.24	0.24
δ_n	0.10	0.10	0.10	0.10	0.03	0.03
δ_h	0.29	0.29	0.29	0.20	0.29	0.20
γ	0.194	0.194	0.194	0.194	0.194	0.194
η _P	0.21	0.27	0.25	0.19	0.15	0.13
% Imported Inputs	0.73	0.65	0.54	0.70	0.62	0.57
% Imported Consumption	0.27	0.35	0.46	0.30	0.38	0.43

	Actual	Δγ	Δα	Δδ_h	Δδ_h + Δδ_n
α	0.25	0.25	0.47	0.25	0.25
(1 - α)	0.20	0.20	0.20	0.20	0.20
δ_n	0.03	0.03	0.03	0.10	0.10
δ_h	0.12	0.12	0.12	0.12	0.29
γ	0.24	0.129	0.24	0.24	0.24
η _P	0.08	0.10	0.13	0.15	0.20
% Imported Inputs	0.58	0.51	0.48	0.76	0.80
% Imported Consumption	0.41	0.49	0.52	0.24	0.20

	Actual	Δα	Δδ_h + Δδ_n	Δγ	Δδ_h + Δδ_n + Δγ
α	0.47	0.25	0.47	0.47	0.47
(1-α_t)	0.18	0.18	0.18	0.18	0.18
δ_n	0.03	0.03	0.10	0.03	0.10
δ_h	0.12	0.12	0.29	0.12	0.29
γ	0.13	0.13	0.13	0.20	0.20
η _P	0.14	0.09	0.26	0.14	0.26
% Imported Inputs	0.49	0.58	0.70	0.52	0.49
% Imported Consumption	0.51	0.42	0.30	0.48	0.51

Country	Year	Share of Imported Inputs Relative to costs	η^{P^N,e} θ = 4	η^{P^N,e} θ = 10
Australia	2000/01	0.09	0.12	0.10
France	2000	0.08	0.11	0.09
Germany	2000	0.09	0.12	0.10
Portugal	1999	0.14	0.19	0.15
USA	1997	0.03	0.04	0.03
Brazil	2000/09	0.03	0.04	0.03

Country	Year	Share of Imported Inputs Relative to costs	η^{P^H,e} θ = 4	η^{P^F,e} θ = 4
Australia	2000/01	0.18	0.31	0.52
France	2000	0.20	0.31	0.60
Germany	2000	0.27	0.43	0,53
Portugal	1999	0.37	0.57	0.64
USA	1997	0.10	0.14	0.69
Brazil	2000/09	0.12	0.17	0.83

Country	Year	Share of Imported Inputs Relative to costs	η^{P^H,e} θ = 10	η^{P^F,e} θ = 10
Australia	2000/01	0.18	0.25	0.59
France	2000	0.20	0.25	0.67
Germany	2000	0.27	0.34	0,60
Portugal	1999	0.37	0.47	0.69
USA	1997	0.10	0.12	0.74
Brazil	2000/09	0.12	0.14	0.86

\begin{matrix} η^{P, e} = α {(\frac{P_{t}^{T}}{P_{t}})}^{1 - φ} [α_{T} {(\frac{P_{t} (h)}{P_{t}^{T}})}^{1 - φ_{T}} η^{P_{T}^{H}, e} + (1 - α_{T}) {(\frac{P_{t} (f)}{P_{t}^{T}})}^{1 - φ_{T}} η^{P_{t}^{F}, e}] \\ + (1 - α) {(\frac{P_{t}^{N}}{P_{t}})}^{1 - φ} η^{P_{t}^{N}, e} \\ and \\ η^{P^{N}, e} = \frac{θ}{θ - 1} (1 + η^{μ_{F} (n, ɛ)}) [μ_{F} (n, ɛ) \frac{{\bar{Z}}_{F, t}}{P_{t}^{N}}], \end{matrix}

\begin{matrix} η^{P, e} = α {(\frac{P_{t}^{T}}{P_{t}})}^{1 - φ} [α {(\frac{P_{t} (h)}{P_{t}^{T}})}^{1 - φ} η^{P_{t}^{H}, e} + (1 - α_{T}) {(\frac{P_{t} (f)}{P_{t}^{T}})}^{1 - φ} η^{P_{t}^{F}, e}] \\ + (1 - α) {(\frac{P_{t}^{N}}{P_{t}})}^{1 - φ} η^{P_{t}^{N}, e}, \end{matrix}

\begin{matrix} η^{P_{t} (h), e} = \frac{θ}{θ - 1} [η^{P^{N}, e} + η^{m (h, e), e} \frac{m (h, e) P_{t}^{N}}{P_{t} (h)} + (1 + η^{μ (h, e), e}) \frac{μ (h, e) {\bar{Z}}_{F, t}}{P_{t}^{N}}], \\ η^{P_{t} (f), e} = 1 - \frac{θ}{θ - 1} \frac{m (f, e) P_{t}^{N}}{P_{t} (f)} [1 - (η^{m (f, e), e} + η^{P^{N}, e})] . \end{matrix}

\begin{matrix} η^{P^{N}, e} = \frac{θ}{θ - 1} δ_{N} (1 + η^{μ_{F} (n, e)}), \\ η^{P_{t} (h), e} = \frac{θ}{θ - 1} [γ (η^{P^{N}, e} + η^{m (h, e), e})] + δ_{H} (1 + η^{μ (h, e), e}), \\ η^{P_{t} (f), e} = 1 - \frac{θ}{θ - 1} γ_{F} [1 - (η^{m (f, e), e} + η^{P^{N}, e})], \\ where \\ γ = \frac{m (h, e) P_{t}^{N}}{P_{t} (h)}, \\ δ_{H} = \frac{μ (h, ɛ) {\bar{Z}}_{F, t}}{P_{t}^{N}}, \\ δ_{N} = \frac{μ_{F} (n, ε) {\bar{Z}}_{F, t}}{P_{t}^{N}}, \\ γ_{F} = \frac{m (f, e) P_{t}^{N}}{P_{t} (f)} . \end{matrix}

\begin{matrix} P_{t}^{T} = {[α_{T} {(P_{t} (h))}^{1 - φ_{T}} + (1 - α_{T}) {(P_{t} (f))}^{1 - φ_{T}}]}^{\frac{1}{1 - φ_{T}}}, \\ P_{t} = {[α {(P_{t}^{T})}^{1 - φ} + (1 - α) {(P_{t}^{N})}^{1 - φ}]}^{\frac{1}{1 - φ}} . \end{matrix}

\begin{matrix} {ERPT}^{ImpGoods} = α {(\frac{P_{t}^{T}}{P_{t}})}^{1 - φ} (1 - α_{T}) {(\frac{P_{t} (f)}{P_{t}^{T}})}^{1 - φ} (\frac{η^{P_{t}^{F}, e}}{η^{P, e}}), \\ {ERPT}^{ImpInputs} = α {(\frac{P_{t}^{T}}{P_{t}})}^{1 - φ} [α_{T} {(\frac{P_{t} (h)}{P_{t}^{T}})}^{1 - φ} \frac{η^{P_{t}^{H}, e}}{η^{P, e}}] + (1 - α) {(\frac{P_{t}^{N}}{P_{t}})}^{1 - φ} (\frac{η^{P_{t}^{N}, e}}{η^{P, e}}) . \end{matrix}

\begin{matrix} P_{t}^{N} = \frac{θ}{θ - 1} [{\bar{Z}}_{N} + μ (n, e) {\bar{Z}}_{F}], \\ P_{t} (h) = \frac{θ}{θ - 1} [{\bar{Z}}_{H} + m (h, e) P_{t}^{N} + μ (n, e) {\bar{Z}}_{F}], \\ P_{t} (f) = \frac{θ}{θ - 1} [{\bar{Z}}_{F} + m (f, e) P_{t}^{N}] . \end{matrix}

	Nominal Exch. Rate	Nominal Exch. Rate	Real Exch. Rate	Real Exch. Rate	Sectoral Exch. Rate	Sectoral Exch. Rate
Elasticity	-0.14*	-0.14*	-0.26*	-0.25*	-0.20*	-0.19*
t-stat	-4.60	-4.84	0.03	0.04	-5.00	-4.43
Industry Fixed Effects	No	Yes	No	Yes	No	Yes
R²	0.01	0.11	0.07	0.15	0.02	0.11
No. Obs.	62	62	62	62	62	62

	Distribution Margin			Imported Input Share
	Avg	Max	Min	Avg	Max	Min
Coffee (bean)	0.00	0.00	0.00	10.30	8.90	12.30
Sugar cane	0.00	0.00	0.00	0.00	0.00	0.00
Rice	1.50	0.20	5.50	9.40	7.70	11.70
Wheat (grain)	60.40	50.30	77.40	5.90	4.30	7.60
Soy bean	1.20	0.10	2.80	17.60	14.00	20.60
Cotton	0.00	0.00	0.10	2.10	1.50	2.80
Corn	0.90	0.40	2.40	10.90	8.70	14.70
Other agriculture products	3.70	3.40	4.20	13.60	12.00	16.10
Metal ores (Iron)	0.00	0.00	0.10	3.70	2.90	4.60
Other mining products	25.20	20.60	31.80	7.00	6.20	8.50
Crude petroleum and natural gas	25.30	20.90	31.40	0.00	0.00	0.00
Coal and lignite; peat	83.60	73.10	86.10	0.00	0.00	0.00
Non-metal mining products	4.60	4.00	5.20	16.60	15.40	18.40
Basic Metals	3.60	1.40	8.50	3.20	2.90	3.40
Steel Products	6.20	3.80	9.90	4.50	3.90	5.50
Fabricated basic metal products	18.60	15.10	22.20	2.30	2.10	2.40
Other Fabricated metal products	6.40	5.20	7.10	7.00	6.40	7.40
Machinery and Equipment	29.70	25.60	36.50	11.90	10.60	13.00
Transport Equipment	8.80	7.40	12.10	10.90	10.00	11.60
Electrical machinery	20.00	15.10	29.90	12.80	10.70	14.50
Electronic Equipment	38.50	36.10	41.10	15.20	12.70	19.80
Motor vehicles	9.40	5.50	13.70	14.20	12.70	15.80
Other motor vehicles	18.90	15.50	23.50	8.50	7.90	9.00
Wood, wood products and furniture	1.70	1.50	2.00	15.60	13.30	19.20
Pulp. paper and paper products	4.40	3.70	5.50	11.90	10.10	15.00
Rubber products	16.00	13.60	19.10	21.90	18.90	25.90
Chemicals and chemical products	21.90	18.90	26.50	10.50	8.50	12.90
Coke and refined petroleum	27.50	23.60	32.30	4.50	3.30	5.70
Other chemicals	20.00	17.50	22.60	6.70	5.10	8.40
Pharmaceuticals	21.70	19.00	26.20	24.30	22.90	27.50
Plastic Products	7.80	7.10	9.10	8.20	6.00	10.30
Natural Fibers	7.70	3.80	15.60	8.10	5.50	11.40
Natural Textiles	3.50	1.20	8.00	16.60	14.70	21.00
Synthetic Fibers	23.20	4.60	47.00	5.50	4.20	7.30
Synthetic Textile	19.60	15.10	22.00	13.90	10.80	16.40
Other Textile	5.40	4.10	7.40	12.90	10.40	17.30
Wearing apparel	2.20	1.30	3.70	25.50	23.60	28.30
Weather and Weather products	3.80	2.50	5.40	14.00	11.80	18.10
Food Products	2.72	1.88	4.10	13.95	12.54	16.26
Beverages	4.00	3.40	4.80	20.90	17.60	25.50

\begin{matrix} P_{t} (h) = \frac{θ}{θ - 1} [{\bar{Z}}_{H, t} + μ (h, e) {\bar{Z}}_{F, t} + m (h, ɛ) P_{t}^{N}] \\ γ = \frac{m (h, e) P_{t}^{N}}{P_{t} (h)} \\ δ = \frac{μ (h, ɛ) {\bar{Z}}_{F}}{P_{t} (h)} \\ γ P_{t} (h) = m (h, e) P_{t}^{N} \\ δ Pt (h) = μ (h, ɛ) {\bar{Z}}_{F} \end{matrix}

\begin{matrix} γ_{F} P_{t} (f) = m (f, e) P_{t}^{N} \\ P_{t} (f) = \frac{θ}{θ - 1} ({\bar{Z}}_{F} + γ_{F} P_{t} (f)) \\ P_{t} (f) = \frac{θ}{θ (1 - γ_{F}) - 1} {\bar{Z}}_{F} . \end{matrix}

[1] camilaciss@hotmail.com

Brasil

Brasil

CPI Exchange Rate Pass-Through Decomposition and Distribution Margins: The Case of Brazil versus Advanced Economies

Abstract