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The theoretical model a la Amiti, Itskhoki, and Konings (2014, AER) suggests that
the inclusion of exporters' market share and import intensity in the exchange rate passthrough
regression is sufficient to reflect the underlying deep parameters. We suggest using
value-added by importing and other countries and invoicing currency ratio as proxies for the
import intensity measure. We examine the effect of value-added contributions of importing
and other countries on the degree of exchange rate pass-through by examining 33 exporting
countries and 13 importing countries for 18 industries between 1995 and 2018. Our results
show that exchange rate pass-through decreases for industries with a higher contribution of
the importing and other country's value-added.
