Description:
<jats:p><jats:bold>Abstract. </jats:bold> We use a detailed database to investigate exchange‐rate pass‐through at the product level for a large number of countries. The empirical analysis suggests that pricing behaviours are dichotomous, with complete pass‐through in around 25% of sectors and significant pricing‐to‐market in the remaining ones. Average long‐run pass‐through coefficient is close to 80%; this result hides a strong heterogeneity of pass‐through behaviours across sectors. Even when composition effects are controlled for, average pass‐through varies across importing countries. The econometric analysis shows that pass‐through tends to be higher in volatile environments; in less developed countries; in weakly integrated markets.</jats:p>