Do Prices Rise Faster Than They Fall? Evidence From Scanner Data

It is a stylized fact that product prices tend to react faster to an increase in costs of intermediate inputs, than to a decrease. This study uses scanner data of retailers in an emerging economy, Kazakhstan, to analyze how large exchange rate shocks impact consumer prices. Consistent with previous studies, we found an incomplete exchange rate pass-through (ERPT) into consumer prices, even a year after the initial shock. This ERPT, however, is heterogeneous and depends on product type (imported versus domestic), shock size, and retailer size. In particular, ERPT is higher for imported products (50%) than for domestic products (25%); ERPT is also non-linear and higher for large retailers. Distinguishing the impacts of appreciation and depreciation reveals that ERPT is asymmetric and the direction of asymmetry is opposite for imported and domestic products. Our findings suggest that domestic producers may be keen on preserving the market share while foreign manufacturers may be more concerned with increasing markup.