Norges Bank

Working Paper

Estimating New Keynesian import price models

Author:
Ida Wolden Bache and Bjørn E. Naug
Series:
Working Paper
Number:
15/2007

Abstract
We estimate a range of New Keynesian import price models for Norway and the UK. Contrary to standard pass-through regression analysis, this approach allows us to make a distinction between the parameters in theoretical price-setting rules and parameters in the expectations mechanisms. We find positive and significant effects of expected future import price growth for Norway. The estimates for the UK do not lend much support to the hypothesis that pricesetting rules are forward-looking. For both countries, the results favour a specification that incorporates both local- and producer currency pricing, but no effect of lagged import price growth. We find mixed evidence of pricing-to-market: only for the UK do the results suggest a role for domestic prices or costs in explaining import prices.

 

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ISSN 1502-8190 (online)

Published 26 December 2007 10:10
Published 26 December 2007 10:10