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

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.

The transparency of monetary policy and the effect of exchange rate pass-through

2021 ◽  
pp. 32-46
Author(s):  
Ph. S. Kartaev ◽  
V. G. Tubdenov
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Developing Economies ◽  
Verbal Description ◽  
Policy Regimes ◽  
Consumer Prices ◽  
Domestic Prices ◽  
Pass Through ◽  
The Interest Rate ◽  
Exchange Rate Pass Through

The work is devoted to the study of the influence of changes in the transparencyof monetary policy on the effect of exchange rate pass-through in consumer prices. Based on econometric modeling of cross-country panel data, it is shown that an increase in the transparency of communication between the central bank and the population leads to a decrease in the elasticity of domestic prices with respect to the exchange rate in countries that target inflation and adhere to other monetary policy regimes. The effect is observed for both developed and developing economies; it is stronger in the second case. The obtained result can be interpreted as an argument in favor of the advisability of the Bank of Russia transition from a verbal description of its future actions to the publication of a quantitative forecast of the interest rate trajectory.

Exchange rate pass-through to consumer prices in Ghana: is there asymmetry?

2018 ◽  
Vol 13 (1) ◽  
pp. 162-184 ◽  
Author(s):  
Lordina Amoah ◽  
Meshach Jesse Aziakpono
Keyword(s):  
Exchange Rate ◽  
Policy Action ◽  
Import Prices ◽  
Content Type ◽  
Long Run ◽  
Consumer Prices ◽  
Pass Through ◽  
Exchange Rate Changes ◽  
Exchange Rate Pass Through ◽  
The Impact

Purpose The purpose of this paper is to reexamine the speed and magnitude of exchange rate pass-through (ERPT) to consumer prices in Ghana. Design/methodology/approach The Johansen Maximum Likelihood approach is employed in the estimation of different models of symmetric and asymmetric ERPT. Specifically asymmetric ERPT models with respect to the direction and size of exchange rate changes are estimated. Findings Results reveal that even though a depreciation in the nominal effective exchange rate will lead to an increase of consumer prices in the long-run, it is not statistically significant. Evidence also suggests a significant asymmetry with respect to direction and size of exchange rate changes. This indicates that the right ERPT model is an asymmetric model. Specifically ERPT is found to be incomplete but relatively higher in periods of depreciation than in periods of appreciation; that is 53 percent against 3 percent. ERPT is also higher during episodes of large changes (about 51 percent). Research limitations/implications It would have been interesting to analyze the impact on consumer prices through changes in import prices. That approach was not adopted due to lack of consistent data on import prices in Ghana. Practical implications It is imperative that the monetary authorities critically monitor exchange rate movements in order to be able to take swift policy action so as to counteract any inflationary pressures from the external sector. In particular, much attention should be paid to events and arrangements that could result in large depreciation of the exchange rate. Originality/value While previous studies have assumed a symmetric ERPT model for Ghana, this paper is unique in that it investigates the most appropriate model for examining ERPT in Ghana whether symmetric or an asymmetric.

scholarly journals STRUCTURAL BREAKS AND BILATERAL EXCHANGE RATE PASS-THROUGH: AN EMPIRICAL CASE OF INDONESIA–UNITED STATES

2011 ◽  
Vol 12 (1) ◽  
pp. 1
Author(s):  
Arintoko Arintoko
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Structural Breaks ◽  
Correction Term ◽  
Import Prices ◽  
Long Run ◽  
Consumer Prices ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through

This study estimates the exchange rate pass-through into domestic prices in Indonesia in the two-stage approach. The study focuses on first step pass-through, i.e. ERPT into import prices and second step pass-through, i.e. into consumer prices, using cointegration and error-correction mechanism (ECM) model. This research uses a Zivot-Andrews technique to test for structural breaks and Gregory-Hansen models to tests. The results show that the long run ERPT to import prices with structural breaks is relatively low compared to the results without them. The absolut error correction term values resulted from cointegration are decreased and the error-correction models need period lagged longer than one-period if the estimation included the estimated structural breaks. The main finding is that allowing for possible breaks around the crises in Indonesia, and a shift of the exchange rate management from managed to free floating in 1997 helps to restore a long run cointegration relationship estimation.

scholarly journals Exchange Rate Pass-Through to Domestic Prices: The Turkish Case (2002-2014)

2017 ◽  
Vol 7 (2) ◽  
pp. 202
Author(s):  
Ilyas Sıklar ◽  
Merve Kocaman ◽  
Sevcan Kapkara
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Nominal Exchange Rate ◽  
Vector Autoregressive ◽  
Consumer Prices ◽  
Domestic Prices ◽  
Producer Prices ◽  
Pass Through ◽  
Turkish Case ◽  
Exchange Rate Pass Through

This study examines the degree of exchange rate pass through (ERPT) into producer prices and consumer prices in Turkey. To see the effect of ERPT, recursive vector autoregressive (VAR) model on monthly data from January 2002 to November 2014 is used. Model includes six variables which are oil prices that represent supply shock, industry production index representing demand shocks, reserve money representing monetary policy, nominal exchange rate and CPI-PPI indices. Obtained results show that although there is a pass through from exchange rate to consumer and producer prices, its degree is not as effective as prior to 2001. This means that policymakers have more power for pursuing independent monetary policy.

scholarly journals Exchange Rate Pass Through in a Small Open Economy: A case study of West African Monetary Zone

2013 ◽  
Vol 9 (4) ◽  
pp. 275-290
Author(s):  
Rahman olanrewaju Raji
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Price Index ◽  
Time Series Data ◽  
Consumer Price Index ◽  
Import Price ◽  
Series Data ◽  
Import Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through

The  study investigated the magnitude of exchange rate pass through to import prices and domestic prices    (consumer price index) in WAMZ economy using quarterly time-series data between 2000 and 2010 with the aids of Vector autoregressive (VAR) modeling technique supported with Johansen co-integration approach cross country analysis comprising of Gambia, Ghana, Nigeria and Sierra-Leone. The study discovered that transmission of exchange rate to import prices is more when compared with consumer price in the zone while the contributions of exchange rate to import price are not less 13 percent at average in entire zone. Consumer price index was explained by exchange rate pass through with an average of 26 percent in the zone where the pass through to consumer price is less than two percent in Ghanaian economy. The Taylor (2000) hypothesis was observed in the study where Ghana and Nigeria are the outlier economies while Nigeria established a positive relationship between interest rate volatility and exchange rate pass through to import prices.

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