The euro exchange rate and consumer prices

In 2011 the ongoing appreciation in the yen against the US$ led Japanese firm Shiomi to consider relocating its production facilities outside of Japan. As a prelude to making this decision, Shiomi commissioned an evaluation of the historical impact of the yen’s appreciation on Japanese competitiveness. This evaluation is the basis for two important lessons in international financial management. First, it is the real exchange rate, rather than the nominal exchange rate, that determines the relative cost competitiveness of countries. Second, in accordance with the rules of purchasing power parity, the historical evaluation showed that higher inflation in the U.S. relative to Japan caused the ratio of Japanese to U.S. prices to fall at roughly the same rate as the yen’s appreciation against the US$. Thus the long-term appreciation in the yen had little impact on Japanese competitiveness. Students are asked to assess the relocation decision in light of the post-case data on exchange rates and consumer prices supplied in the case. The case is appropriate for use in an international financial management or international economics course.

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Albania's Monetary Policy and the Basic Indicators that Effect the Economic Growth

Journal of International Cooperation and Development ◽

10.36941/jicd-2019-0012 ◽

2019 ◽

Vol 2 (2) ◽

pp. 51

Author(s):

Bernard Balla

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Exchange Rate ◽

Interest Rates ◽

Inflation Targeting ◽

Inflation Rate ◽

Full Employment ◽

Price Stability ◽

Macroeconomic Policies ◽

Consumer Prices

Macroeconomic policies aim to stabilize the economy by achieving their goal of price stability, full employment and economic growth. Price stability is the responsibility of macroeconomic policies that are developed to maintain a low inflation rate, contribute to the solidity of the domestic product and maintain an exchange rate that can be predictable. The purpose of this paper is to analyze Albania's monetary policy by highlighting the main indicators that can be used as a measurement of the efficiency of this policy in the economic development. The literature review shows that there are many attitudes regarding the factors that need to be taken into consideration when analyzing monetary policies, including the elements of fiscal policies. In the Albanian economy, the prices and the level of inflation are the most important aspects. The Bank of Albania uses the inflation targeting regime, considering that the main indicator of inflationary pressures in the economy is the deviation of inflation forecasted in the medium term by its target level. In numerical terms, the bank intends to maintain its annual growth in consumer prices at the level of 3%. According to the latest reports published by the Bank of Albania in 2019, monetary policy continues to contribute positively to a financial environment with a low interest rate and an annual inflation rate of 2%. Although the inflation rate hit the lowest value of 1.8 % in 2018, a balanced rate was achieved through the reduction of interest rates and risk premiums in financial markets and, more recently, through the tightening of the exchange rate. These monetary conditions are appropriate to support the growth of domestic demand and the strengthening of inflationary pressures.

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The Responsiveness of Consumer Prices to Exchange Rates And the Implications for Exchange-Rate Policy: A Survey Of a Few Recent New Open-Economy...

10.3386/w8725 ◽

2002 ◽

Cited By ~ 31

Author(s):

Charles Engel

Keyword(s):

Exchange Rate ◽

Exchange Rates ◽

Open Economy ◽

Exchange Rate Policy ◽

Consumer Prices ◽

Rate Policy

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Understanding the exchange rate pass-through to consumer prices in Vietnam: the SVAR approach

International Journal of Emerging Markets ◽

10.1108/ijoem-10-2018-0551 ◽

2019 ◽

Vol 15 (5) ◽

pp. 971-989 ◽

Cited By ~ 2

Author(s):

Anh The Vo ◽

Chi Minh Ho ◽

Duc Hong Vo

Keyword(s):

Exchange Rate ◽

Economic Integration ◽

Global Financial Crisis ◽

Global Market ◽

Content Type ◽

Consumer Prices ◽

The Exchange Rate ◽

Pass Through ◽

Exchange Rate Pass Through ◽

The Impact

Purpose The purpose of this paper is to examine the degree of the exchange rate pass-through (ERPT) to the consumer price index (CPI) at both aggregated and disaggregated levels in Vietnam. Updated data of the nominal effective exchange rate (NEER) and bilateral exchange rate (BiER) have been utilized in this study for the comparison purposes. Design/methodology/approach Advanced time-series approaches such as a structural vector autoregressive framework, structural impulse response functions (SIRFs), and structural forecast-error variance decomposition (SFEVD) are utilized in this paper. Findings Empirical findings from this paper present an incomplete degree of the ERPT to the aggregated CPI. The ERPT based on the BiER is observed to have substantially larger magnitude than the NEER-based pass-through. For the disaggregated level, the degree of the ERPT varies considerably across sub-components of the CPI, with a higher magnitude of the ERPT elasticity being found from the BiER estimations. The index of housing and construction materials has the largest ERPT based on the BiER, followed by the food and foodstuffs (1.00 and 0.56, respectively). The macroeconomic and financial environments as well as an economic integration into the global market may be the main causes of a higher ERPT in Vietnam in comparison with other ASEAN countries. Research limitations/implications The significant and incomplete pass-through of the exchange rate in Vietnam can affect firms’ and households’ budget planning, savings and profits. This finding generally implies that the cost of devaluation of the domestic currency affects the society as the whole in terms of welfare. The State Bank of Vietnam should carefully consider the overall effect of welfares when formulating and implementing strategies of currency devaluation. In addition, the Vietnamese economy becomes more sensitive to external vulnerabilities via changes of the exchange rate during an increasingly economic integration into the global market. In order to maintain inflation stability, it is vitally important to reduce the impact of exchange rate movements on the domestic prices, both aggregated and disaggregated levels, by pursuing either monetary policy credibility or inflation targeting. Originality/value Previous studies on the ERPT literature in the Asia region or for emerging countries focus mainly on the aggregated data of the CPI. Previous studies were conducted before the global financial crisis in 2008/2009. The current paper is the first of its kind to examine the pass-through from exchange rates to consumer prices in Vietnam using both aggregated and disaggregated data.

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

Economies ◽

10.3390/economies7010005 ◽

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.

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Monetary Policy in the Conditions of Influence of Negative Factors of the World Economy

Scientific Research and Development Economics ◽

10.12737/article_5c5985015e1071.09731587 ◽

2019 ◽

Vol 7 (1) ◽

pp. 8-13 ◽

Cited By ~ 1

Author(s):

Ольга Николайчук ◽

Olga Nikolaychuk ◽

Д. Кадырова ◽

D. Kadyrova

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

World Economy ◽

Exchange Rate Regime ◽

Global Market ◽

Energy Prices ◽

Consumer Prices ◽

The World ◽

The Impact ◽

Negative Factors

The article analyzes the monetary policy in the context of exogenous shocks of the external sector. The Bank of Russia and Rosstat use official statistics for 2000–2018. The parameters of the action of negative factors of the world economy apply the conditions of world trade and changes in the exchange rate of national currencies. The graphic form analyzes the susceptibility of macroeconomic indicators to changes in the external market and their dependence on fluctuations in energy prices. The influence of consumer prices and inflation on the monetary policy of the Central Bank is considered. The analysis allows us to conclude about the relationship of the effect of events from processes in the global market. It was concluded that, despite these risks, there are optimal ways of conducting monetary policy, which remain the targeting of inflation and the effect of the floating exchange rate regime of the national currency. For effective results in reducing the dependence of macroeconomic processes on the impact of external shocks, coordinated activities of all branches of economic power, and their effective macro-prudential and fiscal policies are important.

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INCOMPLETE EXCHANGE RATE PASS-THROUGH TRANSMISSION TO PRICES: AN SVAR MODEL FOR TUNISIA

Annals of Financial Economics ◽

10.1142/s2010495216500172 ◽

2016 ◽

Vol 11 (04) ◽

pp. 1650017

Author(s):

FATMA MARRAKCHI CHARFI ◽

MOHAMED KADRIA

Keyword(s):

Exchange Rate ◽

Control Variable ◽

Impulse Response Functions ◽

Import Prices ◽

Consumer Prices ◽

Nominal Exchange Rates ◽

Producer Prices ◽

Pass Through ◽

The Interest Rate ◽

Exchange Rate Pass Through

In this paper, we tried to revisit the transmission degree of exchange rate variations to domestic prices (import prices, MPI; producer prices, PPI; and consumer prices, CPI) in Tunisia. To do this, we used the VAR–SVAR methodology, over the 2000:1–2013:12 period. The adopted mode is gathering national prices, nominal exchange rates, foreign prices and a control variable that is the interest rate. The findings highlights that the pass-through is incomplete for all considered prices. However, the degree of the exchange rate pass-through is the highest on import prices, is moderate on producer prices and is the lowest on consumer prices. Besides, the incomplete pass-through of MPI results from the pricing to market behavior and the lowest pass-through for CPI is due basically to the composition of this index which is administrated by 30% of its components. The impulse response functions analysis, that largely corroborates to the variance decomposition, shows that when the central bank conducts a restrictive monetary policy the inflation decreases without widening the output gap.

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