The second application is to use the WIOD value-added trade database to empirically
estimate exchange rate and other price change pass-through, and compare the
results of those estimations from the same data but using gross trade data instead of
value-added trade. There is a broad literature, which we describe later in this paper,
that examines a long-running question on why exchange rates and other global
price changes have less than perfect pass through to domestic prices. Again we find
substantial differences between the estimates, with the value-added-based estimates
providing a statistically superior fit and intuitively more appealing results than those
based on the literature.