Passthroughpriser

Passthroughpriser, or pass-through prices, is a term used in economic analysis to describe the extent to which changes in producers’ costs are transmitted to consumer prices. It measures how much of a shock to inputs, taxes, exchange rates, or regulatory costs shows up in the prices paid by households and firms. Pass-through can vary across goods and over time, depending on market conditions and pricing strategies.

The degree of pass-through is influenced by several factors. Market structure and competition determine how much pricing power firms have. Short-run pass-through tends to be incomplete due to menu costs, contract rigidity, and inventory considerations, while the long-run pass-through can be higher as firms adjust prices and costs over time. Exchange-rate pass-through specifically tracks how fluctuations in currency values affect import and consumer prices, with additional influence from global supply chains, tariffs, and currency hedging.

Pass-through is typically assessed using the ratio of the change in final prices to the change in the relevant cost or price shock. Partial pass-through means only a portion of a cost change is reflected in prices; full pass-through implies prices move in line with costs. The concept is central to inflation analysis and monetary policy, as higher pass-through can accelerate price increases, while low pass-through can dampen immediate inflation.

See also: pass-through, exchange-rate pass-through, inflation, macroeconomics.