Abstract
We examine exchange rate passthrough into US import prices for 29 manufacturing industries using eight exchange rate indexes. These indexes vary by the number of currencies included; whether the weight on each currency is based on total trade with the United States or solely imports; and, whether the weights vary by industry. Our results indicate that passthrough is generally incomplete but varies across industries. Moreover, passthrough is sensitive to the exchange rate index. Using bootstrapped J-tests we show that major currency indexes perform better than their broad currency counterparts. When using a major currency index, industry-specific exchange rate indexes are preferred to aggregate indexes.
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