Global Economic Uncertainties and Exchange Rate Shocks

This paper evaluates the response of G7 real exchange rates to oil supply and demand shocks developed by Kilian (2009). We find evidence suggesting that oil shocks are associated with the appreciation (depreciation) of real exchange rates for oil exporting (importing) countries. Further evidence, based on the analysis of forecast error variance decomposition, indicates that oil-specific demand shocks are the main contributor to variation in real exchange rates, whereas oil supply shocks contribute the least. Finally, regarding the role of monetary policy in responding to oil and exchange rate shocks, we find evidence showing monetary policy reacts only to oil-specific demand and aggregate demand shocks in three countries, whereas monetary policy responds to real exchange rate fluctuations in four countries.

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What Happens When the Kiwi Flies? The Sectoral Effects of the Exchange Rate Shocks

SSRN Electronic Journal ◽

10.2139/ssrn.2356044 ◽

2013 ◽

Cited By ~ 1

Author(s):

zer Karagedikli ◽

Michael Ryan ◽

Daan Steenkamp ◽

Tugrul Vehbi

Keyword(s):

Exchange Rate ◽

The Exchange Rate ◽

Exchange Rate Shocks

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Exchange rate pass-through to inflation in Egypt: a structural VAR approach

Review of Economics and Political Science ◽

10.1108/reps-07-2018-001 ◽

2018 ◽

Vol 3 (2) ◽

pp. 2-19 ◽

Cited By ~ 2

Author(s):

Omneia Helmy ◽

Mona Fayed ◽

Kholoud Hussien

Keyword(s):

Exchange Rate ◽

Price Index ◽

Structural Var ◽

Empirical Literature ◽

Content Type ◽

The Exchange Rate ◽

Exchange Rate Shocks ◽

Pass Through ◽

Exchange Rate Pass Through ◽

The Impact

Purpose The theoretical and empirical literature stipulated that exchange rate shocks do influence the domestic price of imports. Hence, this paper aims to investigate the underlying relationship between the exchange rate and prices known as the exchange rate pass-through. Design/methodology/approach The paper uses a structural vector auto-regression (SVAR) model, drawing on Bernanke (1986) and Sims (1986), to empirically examine and analyze the pass-through of exchange rate fluctuations to domestic prices in Egypt. Findings The empirical results of the monthly data between 2003 and 2015 revealed that the exchange rate pass-through in Egypt is fairly substantial but incomplete and slow in the three price indices [IMP, producer price index and consumer price index (CPI)]. However, the impact is more prominent for consumer prices than for any other price index. This finding could be attributed to the fact that the CPI in Egypt is composed of a relatively large number of subsidized commodities and goods with administered prices as well as the authorities’ behavior in manipulating prices (i.e. export ban). This is expected to weaken the transmission of exchange rate shocks. Practical implications The result has interesting implications for Egypt’s ability to attain an effective inflation targeting regime. Originality/value The study contributes to the literature by assessing the effect of changes in the exchange rate (the Egyptian £ vis-à-vis the US$) on prices using an updated time series from 2003 to 2015. It addresses the limitations of the study of Nafie et al. (2004), which found no strong relationship between the exchange rate and inflation rate in the Egyptian context. One of these limitations was using the CPI, as the only price index.

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