Pass-through Measurements Research Articles

Inflation and exchange rate pass-through

This paper investigates exchange rate pass-through into consumer prices by considering the nature of the shock triggering currency movements. By individually estimating structural factor-augmented vector autoregression models for 55 countries, monetary policy shocks are shown to be associated with higher exchange rate pass-through measures compared to other domestic shocks, while global shocks have widely different effects across countries. Pass-through measures tend to be lower in countries that combine flexible exchange rate regimes and credible inflation targets, where central bank independence can greatly facilitate the task of stabilizing inflation by using the exchange rate as a buffer against external shocks. It is implied that exchange rate pass-through should be investigated by considering the nature of the shock that triggers currency movements and country characteristics that affect the response of prices.

An initial case study to deconvolve natural remanent magnetization of a continuous paleomagnetic sample using the software UDECON

Previous studies have compiled relative paleointensity data for the last 2–3 Ma from individual paleomagnetic records obtained from marine sediment cores. These records have mostly been obtained by pass-through measurements, which are known to smooth and alter magnetic signals. Among many efforts, a standalone open-use graphical software UDECON has been developed to deconvolve pass-through measurement data. As an initial case study to assess the applicability of the software to deconvolve natural remanent magnetization (NRM) of a continuous paleomagnetic sample, we chose 40 discrete samples from a piston core recovered in the northeast Pacific. We measured NRMs after alternating field demagnetization at 20 mT for both discrete samples and a simulated continuous sample, made by connecting the discrete samples. The discrete samples show centimeter-scale variations in NRM. Such variations are smoothed out and mostly disappear in the results of the simulated continuous sample. However, after using the software to deconvolve the data, the variations are almost completely restored. Good agreement between the discrete sample data and the deconvolved data indicates that the deconvolution by the software is very successful. We observe detailed features of a directional reversal in the data from the discrete samples and in the deconvolved data but not in the data from the simulated continuous sample. This emphasizes that the deconvolution analysis by the software is a powerful tool to extract detailed features from continuous paleomagnetic records obtained by pass-through measurements.

Asymmetric incidence of sales taxes: A short-run investigation of gasoline prices

This paper investigates the shifting of sales taxes to consumers through retail prices in the short run. Retail data on gasoline prices are used at the station level within the U.S., including observations from all fifty states and the District of Columbia. A difference-in-differences approach is employed to identify the short-run effects of the changes in state taxes as of January 1st, 2015, when five states have increased their gasoline sales taxes, while five other states have decreased theirs. States experiencing such changes in sales taxes (between December 31st, 2014 and January 1st, 2015) are analyzed as the treatment group of a natural policy experiment, where the control group consists of states with no changes in their sales taxes. The results show that both sales-tax increases and decreases are under-shifted to consumer prices, although the under-shifting of sales-tax decreases is much higher (i.e., the asymmetric incidence of sales taxes). The pass-through measures also differ significantly across states, showing the importance of having a nationwide analysis. The results are robust to the consideration of retailer characteristics, wholesale prices, retail brand effects and hourly price changes within each day.

UDECON: deconvolution optimization software for restoring high-resolution records from pass-through paleomagnetic measurements

The rapid accumulation of continuous paleomagnetic and rock magnetic records acquired from pass-through measurements on superconducting rock magnetometers (SRM) has greatly contributed to our understanding of the paleomagnetic field and paleo-environment. Pass-through measurements are inevitably smoothed and altered by the convolution effect of SRM sensor response, and deconvolution is needed to restore high-resolution paleomagnetic and environmental signals. Although various deconvolution algorithms have been developed, the lack of easy-to-use software has hindered the practical application of deconvolution. Here, we present standalone graphical software UDECON as a convenient tool to perform optimized deconvolution for pass-through paleomagnetic measurements using the algorithm recently developed by Oda and Xuan (Geochem Geophys Geosyst 15:3907–3924, 2014). With the preparation of a format file, UDECON can directly read pass-through paleomagnetic measurement files collected at different laboratories. After the SRM sensor response is determined and loaded to the software, optimized deconvolution can be conducted using two different approaches (i.e., Grid search and Simplex method) with adjustable initial values or ranges for smoothness, corrections of sample length, and shifts in measurement position. UDECON provides a suite of tools to view conveniently and check various types of original measurement and deconvolution data. Multiple steps of measurement and/or deconvolution data can be compared simultaneously to check the consistency and to guide further deconvolution optimization. Deconvolved data together with the loaded original measurement and SRM sensor response data can be saved and reloaded for further treatment in UDECON. Users can also export the optimized deconvolution data to a text file for analysis in other software.

Asymmetric Incidence of Sales Taxes

This paper investigates the shifting of sales taxes to consumers through retail prices. Retail data on gasoline prices are used at the station level within the U.S., including observations from all fifty states and the District of Columbia. A difference-in-difference approach is employed to identify the effects of the changes in state taxes as of January 1st, 2015, when five states have increased their gasoline sales taxes, while five other states have decreased theirs. States experiencing such changes in sales taxes (between December 31st, 2014 and January 1st, 2015) are analyzed as the treatment group of a natural policy experiment, where the control group consists of states with no changes in their sales taxes. The results show that increased sales taxes are shifted forward to consumers, while reduced sales taxes are shifted backward. The pass-through measures differ significantly across states, showing the importance of having a nationwide analysis. When we search for a systematical explanation for the heterogeneity of tax shifting across retailers, it is shown through a threshold analysis that the initial retail price is an important determinant: while pass-through of an increase in sales taxes goes down with initial prices, pass-through of a reduction in sales taxes goes up with initial prices, showing evidence for an asymmetric incidence of sales taxes interacting with initial retail prices. The results are robust to the consideration of retailer characteristics, wholesale prices, retail brand effects and hourly price changes within each day.

Deconvolution of continuous paleomagnetic data from pass-through magnetometer: A new algorithm to restore geomagnetic and environmental information based on realistic optimization

The development of pass-through superconducting rock magnetometers (SRM) has greatly promoted collection of paleomagnetic data from continuous long-core samples. The output of pass-through measurement is smoothed and distorted due to convolution of magnetization with the magnetometer sensor response. Although several studies could restore high-resolution paleomagnetic signal through deconvolution of pass-through measurement, difficulties in accurately measuring the magnetometer sensor response have hindered the application of deconvolution. We acquired reliable sensor response of an SRM at the Oregon State University based on repeated measurements of a precisely fabricated magnetic point source. In addition, we present an improved deconvolution algorithm based on Akaike's Bayesian Information Criterion (ABIC) minimization, incorporating new parameters to account for errors in sample measurement position and length. The new algorithm was tested using synthetic data constructed by convolving “true” paleomagnetic signal containing an “excursion” with the sensor response. Realistic noise was added to the synthetic measurement using Monte Carlo method based on measurement noise distribution acquired from 200 repeated measurements of a u-channel sample. Deconvolution of 1000 synthetic measurements with realistic noise closely resembles the “true” magnetization, and successfully restored fine-scale magnetization variations including the “excursion.” Our analyses show that inaccuracy in sample measurement position and length significantly affects deconvolution estimation, and can be resolved using the new deconvolution algorithm. Optimized deconvolution of 20 repeated measurements of a u-channel sample yielded highly consistent deconvolution results and estimates of error in sample measurement position and length, demonstrating the reliability of the new deconvolution algorithm for real pass-through measurements.

Convergence in Eurozone Retail Banking? What Interest Rate Pass-Through Tells Us About Monetary Policy Transmission, Competition and Integration

This study aims at unifying the empirical research on the financial part of the monetary transmission process in the Eurozone between 1993 and 2002. After endogenously determining structural breaks, we select an optimal pass-through model for a series of national retail interest rates for each break-free sub-period. We apply these models to the pass-through of monetary policy shocks as measured by the overnight money market rate as well as to a measure of cost of funds and furthermore allow the pass-through process to be characterised by thresholds and asymmetries. We find that structural breaks occur on average well before EMU. We confirm the result of previous studies that report increases in size and speed of the pass-through. This finding holds, however, only when using the monetary policy rate proxy, indicating an increase in monetary policy efficiency. When using pass-through measures as an indicator for Eurozone banking market integration, the view that the markets are still fragmented is supported, with the possible exemption of short-term lending to enterprises. Finally, our analysis of the structural determinants of the pass-through process confirms the widely held view that nominal, real, and structural convergence can lead to a more homogenous transmission process in the Eurozone. However, full convergence may yet be precluded by legal and cultural differences.