Exchange rate pass-through and invoicing currency choice between fixed and floating exchange rate regimes: Evidence from Malawi’s transaction-level data

2021 ◽  
Author(s):  
Angella Faith Montfaucon ◽  
Kiyotaka Sato ◽  
Nagendra Shrestha ◽  
Craig Parsons
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regimes ◽  
Level Data ◽  
Floating Exchange Rate ◽  
Transaction Level ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Invoicing Currency

scholarly journals Exchange Rate Pass-Through in the Caucasus and Central Asia

2020 ◽  
Vol 20 (154) ◽  
Author(s):  
Tigran Poghosyan
Keyword(s):  
Exchange Rate ◽  
Central Asia ◽  
Global Financial Crisis ◽  
Exchange Rate Regime ◽  
Exchange Rate Regimes ◽  
Floating Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Changes ◽  
The Global Financial Crisis ◽  
Exchange Rate Pass Through

This paper estimates the extent and speed of exchange rate pass-through (ERPT) in seven Caucasus and Central Asia (CCA) countries using monthly data over the January 1995–May 2020 period. The estimations are performed using the local projections method. We find that the average pass-through in the CCA is about 10 percent on impact and about 25 percent after 12 months. There is no evidence of asymmetric ERPT with respect to the size and the sign of exchange rate changes. The pass-through is broadly unchanged in fixed versus floating exchange rate regimes. There has been a downward shift in the speed of ERPT in the aftermath of the global financial crisis as CCA countries have entered a relatively low inflation environment. The pass-through estimates could be used by the CCA monetary authorities for inflation projections. The absence of non-linearities in the pass-through with respect to the exchange rate regime suggests that transition from fixed to floating exchange rate regimes in the region is not likely to impose additional inflationary costs.

scholarly journals Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

Economies ◽  
2019 ◽  
Vol 7 (1) ◽  
pp. 5
Author(s):  
Diby François Kassi ◽  
Dilesha Nawadali Rathnayake ◽  
Akadje Jean Roland Edjoukou ◽  
Yobouet Thierry Gnangoin ◽  
Pierre Axel Louembe ◽  
...  
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regimes ◽  
Short Term ◽  
Franc Zone ◽  
Consumer Prices ◽  
Cfa Franc Zone ◽  
The Exchange Rate ◽  
Sub Saharan ◽  
Pass Through ◽  
Exchange Rate Pass Through

This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 sub-Saharan African (SSA) countries from 1990Q1 to 2017Q4. We estimate the exchange rate pass-through (ERPT) to consumer prices for each country by using the nonlinear autoregressive distributed lag (NARDL) framework and dynamic panel techniques robust to cross-sectional dependence. First, our findings suggest an asymmetrical ERPT in the SSA region during the short term, whereas there are mixed results across subregions in the long term. Second, the results of the panel analysis suggest incomplete and significant ERPT to consumer prices in the entire SSA region, which is higher during depreciation of the local currency than after appreciation in the short-term, especially in the CFA Franc zone. Third, we find nonlinear ERPT with respect to the size of the exchange rate. Finally, we find that pass-through is higher in countries with fixed exchange rate regimes (CFA franc zone) in a low inflationary environment than in countries with floating exchange rate regimes and high inflation levels. Pass-through is greater during large exchange rate changes than after small changes. Therefore, the policy implication is to consider these asymmetries and nonlinearities to improve monetary policy’s credibility, enhance trade liberalization, and promote competitive market structures in the SSA region.

scholarly journals Dollar Invoicing and the Heterogeneity of Exchange Rate Pass-Through

2019 ◽  
Vol 109 ◽  
pp. 527-532
Author(s):  
Emine Boz ◽  
Gita Gopinath ◽  
Mikkel Plagborg-Møller
Keyword(s):  
Exchange Rate ◽  
Bayesian Approach ◽  
Hierarchical Bayesian ◽  
Dollar Exchange Rate ◽  
Country Level ◽  
Pass Through ◽  
Trade Elasticity ◽  
Exchange Rate Pass Through ◽  
Invoicing Currency

We show empirically that the variation across country pairs in exchange rate pass-through and trade elasticity is meaningfully explained by the dollar's dominance as invoicing currency. We use a hierarchical Bayesian approach to directly and flexibly model pass-through heterogeneity conditional on the invoicing currency share. We estimate that the importer's country-level dollar invoicing share explains 15 percent of the overall variance across trading pairs in dollar exchange rate pass-through into bilateral prices.

scholarly journals Fear of Floating in Turkey

2015 ◽  
Vol 5 (2) ◽  
pp. 288
Author(s):  
Ilyas Sıklar ◽  
Taner Sekmen
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Currency Crises ◽  
Inflation Targeting ◽  
Foreign Exchange Rates ◽  
Before And After ◽  
Floating Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Fear Of Floating

<p class="ber"><span lang="EN-GB">Many emerging markets have adopted floating exchange rate regimes after currency crises. Turkey has experienced a floating regime since 2002 combined with inflation targeting. The aim of this paper is to investigate the “fear of floating” phenomenon,</span><span lang="EN-GB"> named by Calvo and Reinhart (2002),</span><span lang="EN-GB"> in the transition to a low and stable inflation environment in Turkey before and after inflation targeting. The results demonstrate that the levels of exchange rate pass-through decreased substantially, thus weakening the “fear of floating” phenomenon in Turkey after inflation targeting. Therefore, we argue whether any reactions of the central bank to foreign exchange rates imply the “fear of floating” or the “fear of inflation”</span></p>

scholarly journals Importers, Exporters, and Exchange Rate Disconnect

2014 ◽  
Vol 104 (7) ◽  
pp. 1942-1978 ◽  
Author(s):  
Mary Amiti ◽  
Oleg Itskhoki ◽  
Jozef Konings
Keyword(s):  
Exchange Rate ◽  
Marginal Cost ◽  
Theoretical Framework ◽  
Market Shares ◽  
Variable Markups ◽  
Level Data ◽  
Theoretical Mechanism ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Exchange Rate Disconnect

Large exporters are simultaneously large importers. We show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. We develop a theoretical framework with variable markups and imported inputs, which predicts that firms with high import shares and high market shares have low exchange rate pass-through. We test and quantify the theoretical mechanism using Belgian firm-product-level data on imports and exports. Small nonimporting firms have nearly complete pass-through, while large import-intensive exporters have pass-through around 50 percent, with the marginal cost and markup channels contributing roughly equally. (JEL D24, F14, F31, L60)

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