Market Conditions and Quality as Determinants of Exchange Rate Passthrough: Microdata evidence

This paper estimates the exchange-rate pass-through to prices with data from the used-car market. We use weekly advertisements of car sales appearing in El Comercio newspaper between 2014 and 2016. We find, controlling for invariant features of cars and sellers, that car prices increase 0,7 per cent when the exchange rate rise one percent. Also, we find evidence of a lower pass-through when both; market tightness and the quality of cars are high. Last, we find evidence of pass-through asymmetry conditional also on market tightness and car quality.