The degree of exchange rate pass-through in the Brazilian economy after the Real

Abstract The research problem of this paper involves the identification of the exchange rate pass-through to the export and import prices in the Brazilian economy. The exchange rate pass-through is estimated for the period from January 2000 to June 2016, using ARDL and DOLS models applied to panel data. Additionally, the Kalman filter is used to estimate the time-varying exchange rate pass-through to the export and import prices. The empirical results show the existence of an incomplete pass-through to the export prices that is also lower than the import prices (average values of 37% and 98%, respectively). In this context, economic policies aiming to increase Brazilian exports via currency depreciation may not be the most suitable instrument to boost economic growth, based on the low level of export competitiveness and the potential impact of the high degree of exchange rate pass-through to the import prices on the broad price level index.