The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
The inertia of the local-currency prices of traded goods in the face of exchange-rate changes is a well-documented phenomenon in international economics. This paper develops a structural model to identify the sources of this local-currency price stability and applies it to microdata from the beer market. The empirical procedure exploits manufacturers' and retailers first-order conditions in conjunction with detailed information on the frequency of price adjustments following exchange-rate changes to quantify the relative importance of local nontraded cost components, markup adjustment by manufacturers and retailers, and nominal price rigidities in the incomplete transmission of such changes to prices. We find that, on average, approximately 60percent of the incomplete exchange rate pass-through is due to local nontraded costs, 8percent to markup adjustment, 30percent to the existence of own-brand price adjustment costs, and 1percent to the indirect/strategic effect of such costs, though these results vary considerably across individual brands according to their market shares.