Exchange rate pass-through in Russian regions: Searching for spatial dependencies

Introduction. The article examines the spatial heterogeneity and factors of the exchange rate pass-through effect in consumer prices in Russian regions. Two hypotheses are tested. The first hypothesis is that there are differences in the magnitude of the passthrough between the Russian regions, the second is the significant influence of spatial relationships between regions on the magnitude of the pass-through effect. Theoretical analysis. The factors of the interregional differences in the pass-through effect are analyzed: the share of imports in the consumption structure, the share of value added produced in the domestic market in the final price of goods, transaction costs, the level of competition and the market structure. Empirical analysis. First pass-through estimates were obtained by means of vector autoregression model. Then the spatial dependence of the exchange rate pass-through was investigated on the basis of the global Moran and Geary indices, LISA, SAR and SEM models. Results. The results indicate the heterogeneity of the pass-through effect in Russian regions, which confirms the first of the hypotheses put forward. Confirmation of the second hypothesis was found only for food products in the short term, which is due to the nature of commodity flows between Russian regions. It is concluded that it is necessary to study the spatial relationships of the pass-through effect based on disaggregated prices.

Download Full-text

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.

Download Full-text

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.

Download Full-text

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

10.20944/preprints201810.0442.v1 ◽

2018 ◽

Author(s):

Diby Francois Kassi ◽

Gang Sun ◽

Ding Ning ◽

Akadje Jean Roland Edjoukou ◽

Yobouet Thierry Gnangoin

Keyword(s):

Exchange Rate ◽

Exchange Rate Regime ◽

Correlated Errors ◽

African Countries ◽

Consumer Prices ◽

The Exchange Rate ◽

Sub Saharan ◽

Pass Through ◽

Exchange Rate Pass Through ◽

Ssa Countries

This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 Sub-Saharan African (SSA) countries from 1990q1 to 2017q4. The exchange rate pass-through (ERPT) to consumer prices is estimated for each country by using the nonlinear autoregressive distributed lags (NARDL) framework and dynamic panel estimators robust to cross-sectionally correlated errors. Firstly, our findings suggest an asymmetrical ERPT in the SSA region during the short-term, whereas there are mixed results across sub-regions in the long-term. Next, we find incomplete and significant ERPT to consumer prices in the entire SSA region which is higher during the depreciation of the local currency than after appreciations. Third, we find nonlinear ERPT with respect to the size of the exchange rate. The pass-through is higher during large exchange rate changes than after small changes.  Finally, we find that the pass-through is greater in the countries with fixed exchange rate regime (CFA franc zone) having low inflationary environment than in the other SSA countries with flexible exchange rate regime and high inflation levels. As a result, policymakers should take into account these asymmetries and non-linearities to improve the credibility of monetary policy, strengthen trade liberalization and establish competitive market structures in the Sub-Saharan region.

Download Full-text

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

Jurnal Ekonomi Pembangunan Kajian Masalah Ekonomi dan Pembangunan ◽

10.23917/jep.v12i1.201 ◽

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.

Download Full-text

(Estimation of the Exchange Rate Pass-Through: Evidence from Korean Domestic Prices)

SSRN Electronic Journal ◽

10.2139/ssrn.3078486 ◽

2004 ◽

Author(s):

Sangho Yi

Keyword(s):

Exchange Rate ◽

Domestic Prices ◽

The Exchange Rate ◽

Pass Through ◽

Exchange Rate Pass Through

Download Full-text

Exchange Rate Pass-Through to Domestic Prices: Evidence from OECD Countries

International Conference on Eurasian Economies 2017 ◽

10.36880/c08.01951 ◽

2017 ◽

Cited By ~ 1

Author(s):

Harun Bal ◽

Mehmet Demiral ◽

Filiz Yetiz

Keyword(s):

Exchange Rate ◽

Panel Data ◽

Price Index ◽

Oecd Countries ◽

Domestic Prices ◽

Macroeconomic Indicators ◽

The Exchange Rate ◽

Pass Through ◽

Exchange Rate Changes ◽

Exchange Rate Pass Through

There is an immense literature on the effects of exchange rate changes on macroeconomic indicators, specifically on the trade balance, growth, inflation, and overall productivity in open economies. One of the main attempts in the related literature is about ascertaining whether the exchange rate fluctuations alter domestic prices. This possible mechanism is called as the pass-through effect which is getting more important since the argument that exchange rate adjustment is a part of the solution for global rebalancing is empirically well-supported. Starting from this claim, this study purposes to explore whether there is an exchange rate pass-through effect in 19 high-income OECD countries over the period 1990-2015. To this end, using a panel data set of consumer price index, producer price index proxied by wholesale price index, the nominal effective exchange rates, and industrial production presented by the value-added share of industry sectors in gross domestic product, structural vector autoregressive (VAR) and autoregressive distributed lag (ARDL) models are estimated in an unbalanced panel data analysis procedure. Results reveal that exchange rate pass-through effects on the domestic prices are significant but not that strong in both the short-run and the long-run. Expectedly, the pass-through effects tend to diminish over time. The study concludes that policy-makers need to consider policy actions accompanying the exchange rate changes to ensure domestic price stability which consequently interacts with many macroeconomic indicators.

Download Full-text

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.

Download Full-text