Exchange rate pass-through and its determinants in Canadian manufacturing industries

In this paper the pass-through of exchange rate changes into the real price s of domestically produced and imported goods in Canadian manufacturing ind ustries is examined through industry estimates of the pass-through elastici ties and a cross-section analysis of their determinants. We find that the d omestic pass-through elasticity increases with the effect of the exchange r ate on domestic costs of production, the export share, the elasticity of su bstitution between imports and domestic goods, and the domestic advertising intensity. The import elasticity increases with the elasticity of substitu tion and the rate of price protection and decreases with advertising intens ity.