Comment on “A Pass-Through Revival”

How Big is the Comeback? Japanese Exchange Rate Pass-Through Assessed by Time-Varying FAVAR

“…It is also worth noting that the industry-breakdown CGPI data analysis (Figure 7) identifies significant heterogeneity in ERPT rates across industries. These results support our decision to include industry-breakdown CGPI data, as suggested by Sato (2014). In so doing, we are able to take account of the growing Japanese production network that may impact price response to exchange rate movements of domestically produced goods, depending on the proportion of intra-firm imported goods in their production processes.…”

“…1 Moreover, relatedly, instead of estimating (TVP)-VAR models separately for different stages of the ERPT along the pricing chain, the (TVP)-FAVAR model allows us to analyze the effect of the exchange rate variations at different stages from import to domestic prices in a unified framework. Second, as pointed out by Sato (2014) and Shioji (2015), analyzing ERPT through aggregate prices masks a large variation in price elasticity to exchange rate movements across different stages of demand, as well as across industries or categories. Therefore, to explore and understand how exchange rate movements affect different prices throughout the Japanese economy, our study includes disaggregate prices both by stage of demand and by industry-breakdown on import and domestic price data series.…”

Japan's Persistent Deflation and Monetary Policy: Editors' Overview

“…Kiyotaka Sato () finds Shioji's analysis of pass‐through very important for policy discussions on achieving the 2% inflation target in Japan. Sato particularly points out two important contributions made by Shioji.…”