Exchange Rate Pass - Through Elasticities in Final and Intermediate Goods: The Case of Turkey

A distinctive feature of present globalization is fragmentation of production. The recent developments in transportation and communication technologies led to a surge in intermediate goods trade. However, intermediate goods trade is often neglected in the empirical studies of the exchange rate pass-through. Using import unit values, this study examines the pass-through of exchange rate changes into both aggregated and disaggregated imported final and intermediate goods prices of Turkey for the period of 1989.q1 to 1996.q4. Empirically, Turkey's pass-through is quite rapid. The short-run and long-run elasticities for both final and intermediate goods suggest that complete pass-through is more relevant for Turkey at both aggregated and disaggregated level. In addition, the estimated pass-through elasticities considerably vary across countries and industries. Finally, intermediate goods have relatively higher pass -through rates than final goods.