Online Borders of the U.S. Dollar: Price Stickiness and Exchange Rate Sensitivities

Speaker: Dr. Dun Jia (Renmin University of China)

Topic:	Online Borders of the U.S. Dollar: Price Stickiness and Exchange Rate Sensitivities
Time&Date:	3:00-4:15 pm, 2018/11/8 (Thursday)
Venue:	Room 619, Teaching A
Speaker:	Dr. Dun Jia (Renmin University of China)
Abstract:	This paper, exploiting the cross-border trade transaction-level data of a leading U.S. online marketplace, provides novel evidence that the Dollar-RMB exchange rate pass-through into the online U.S. import prices can be large (medium run pass-through of 45 percent) and the convergence to a complete pass-through is fast (half-life six months) even when all trades are settled in U.S. dollars. These results complement the evidence found in the studies using offline survey data in favor of the “privileged insularity” of U.S. dollar. Our findings suggest that the U.S. dollar can be increasingly sensitive to exchange rate fluctuations when more cross-border trades are settled over the virtual borders. These results have great implications for spillover effects of U.S. monetary policy and imported inflation. With sizeable heterogeneity of the price adjustment frequencies and the magnitudes of exchange rate pass-through across the disaggregated goods categories, higher price stickiness is associated with lower long run exchange rate pass-through, even conditional on price changes.