scholarly journals An empirical study of exchange rate pass-through in China

2012 ◽  
Vol 59 (2) ◽  
pp. 135-156 ◽  
Author(s):  
Xiaowen Jin
Keyword(s):  
Exchange Rate ◽  
Linear Model ◽  
Inflation Rate ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Exchange Rate Policy ◽  
Chinese Government ◽  
Long Run ◽  
Pass Through ◽  
Exchange Rate Pass Through

This paper seeks to estimate exchange rate pass-through in China and investigate its relationship with monetary policy. Linear and VAR models are applied to analyze robustness. The linear model shows that, over the long run, a 1% appreciation of NEER causes a decline in the CPI inflation rate of 0.132% and PPI inflation rate of 0.495%. The VAR model supports the results of the linear model, suggesting a fairly low CPI pass-through and relatively higher PPI pass-through. Furthermore, this paper finds that, with the fixed exchange rate regime, CPI pass-through remains higher. The exchange rate regimes influence on CPI pass through, combined with the fact that appreciation diminishes inflation, suggests that the Chinese government could pursue a more flexible exchange rate policy. In addition, reasons for low exchange rate pass-through for CPI are analyzed. The analysis considers price control, basket and weight of Chinese price indices, distribution cost, and imported and non-tradable share of inputs.

scholarly journals Investigating Exchange Rate Pass-through to Consumer Prices in Nigeria

2021 ◽  
Vol 21 (1) ◽  
pp. 105-121
Author(s):  
Ephraim Ugwu ◽  
Ditimi Amassoma ◽  
Christopher Ehinomen
Keyword(s):  
Exchange Rate ◽  
Research Work ◽  
Exchange Rate Policy ◽  
Long Run ◽  
Consumer Prices ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact ◽  
Negative Shock

Abstract Research background: There have been several studies on the degree of exchange rate pass-through (ERPT) to consumer prices, as well as macroeconomic environment with yet no clear direction. Purpose: This research work investigates exchange rate pass-through effects into consumer prices in Nigeria from 1960 to 2018. Research methodology: The methodology employed by the study for estimation is the Johansen cointegration and Vector Error Correction Model (VECM) procedures. Results: The empirical results indicate an incomplete pass-through of exchange rate into consumer prices in Nigeria. The pass-through is found to be 1.6 for the model under consideration. The impulse response function results indicate that the response of the consumer prices to the exchange rate shock decreases immediately to a negative shock in the short run, and continues along the horizon to a positive shock in the long run. Also, the response of consumer prices to interest rate shock decreases immediately and continues to fluctuate to a negative shock in both the short run long run horizon. Novelty: The results support the view that exchange rate policy should be complimented with coordinated macroeconomic policy approaches in order to control inflationary level in the economy. The study therefore recommends that the Federal Government should adopt a tightening of the monetary policy as it will help reduce the impact of exchange rate depreciation on consumer prices.

scholarly journals Exchange Rate Pass-through to Consumer Prices in Pakistan: Does Misalignment Matter?

2010 ◽  
Vol 49 (1) ◽  
pp. 19-35 ◽  
Author(s):  
Atif Ali Jaffri
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Jel Classification ◽  
Price Inflation ◽  
Long Run ◽  
Consumer Prices ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact

This study investigates the impact of exchange rate changes on consumer prices (commonly known as exchange rate pass-through (ERPT)) in Pakistan for the period 1995M1 to 2009M3. The study estimates short-run and long-run ERPT in Pakistan while taking into account the existing real exchange rate misalignment (RERM). The results suggest that the ERPT to consumer price inflation in Pakistan is very low (close to zero). The impact of the previous periods’ misalignment on inflation is found significant in managed exchange rate regime. However, the overall sample misalignment does not affect inflation. The impact of foreign inflation on domestic inflation is positive and statistically significant. JEL classification: F31, F41, E31 Keywords: Pass-through, Misalignment, Inflation

VIETNAM’s INCOMPLETE EXCHANGE RATE PASS-THROUGH

2020 ◽  
pp. 1-18
Author(s):  
PHAM THI THANH XUAN
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Regime ◽  
Flexible Exchange Rate ◽  
Time Varying ◽  
Pass Through ◽  
Exchange Rate Pass Through

We measure exchange rate pass-through (ERPT) for Vietnam and find that Vietnam’s ERPT is low, incomplete, and time varying. Our results also indicate that during appreciation periods ERPT is modest, but that during downturns ERPT effects are much larger. Moreover, our results indicate that the flexible exchange rate regime has successfully anchored the ERPT.

EXCHANGE RATE PASS-THROUGH FOR SELECTED ASIAN ECONOMIES

2001 ◽  
Vol 46 (02) ◽  
pp. 247-273 ◽  
Author(s):  
MUN-HENG TOH ◽  
HWEI-JING HO
Keyword(s):  
Exchange Rate ◽  
A Priori ◽  
Flexible Exchange Rate ◽  
Pricing To Market ◽  
Long Run ◽  
Short Run ◽  
Pass Through ◽  
Export Industries ◽  
Exchange Rate Pass Through ◽  
Error Correction Modeling

This paper investigates the degree of exchange rate pass-through for the selected Asian countries namely Malaysia, Thailand, Taiwan, and Singapore. Unlike past studies, this paper focuses on small open economies and includes exports of primary commodities in the investigation. We utilize cointegration techniques based on Engle and Granger (1987) and Johansen and Juselius (1990), and error correction modeling, to provide a more robust and rigorous investigation of the long run and short run pass-through of exchange rates. It is found that, in general, the degree of pass-through is high, although there is a small extent of pricing to market found for all countries. For Malaysia, the degree of pricing to market found suggests that there is intense competition in the export industries. In the case of Thailand, there is almost complete pass-through and this conforms to our a priori expectations. In the case of Singapore and Taiwan, we detect a higher degree of pass-through compared to past studies. For a country, the high degree of pass-through will support the adoption of more flexible exchange rate oriented monetary policies, and for firms it will reveal the limits of their price setting behavior amidst international competition.

Conclusions

2016 ◽  
Author(s):  
Jeffry A. Frieden
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Policy ◽  
Theoretical Argument ◽  
Economic Agents ◽  
Cross Border ◽  
Domestic Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Export Competition

This chapter summarizes key findings. This book makes a simple theoretical argument about the distributional implications of exchange rate policy. It suggests that economic actors with important cross-border interests, exposed to currency volatility, will tend to prefer more stable and predictable exchange rates. It also claims that tradables producers will, all else being equal, tend to prefer a depreciated real exchange rate. These concerns will be tempered by the extent of exchange rate pass-through—that is, the degree to which currency movements affect domestic prices. The analysis in this book shows that countries whose economic agents are more involved in cross-border trade are more likely to fix their exchange rates in order to reduce currency volatility. Countries with large groups susceptible to import or export competition—import-competing manufacturers and export farmers—are more likely to choose flexible exchange rates that allow currency depreciations. Governments facing an election encourage or allow currency appreciation that increases the purchasing power of consumers.

scholarly journals The Speed of Exchange Rate Pass-Through

2019 ◽  
Vol 18 (1) ◽  
pp. 506-538 ◽  
Author(s):  
Barthélémy Bonadio ◽  
Andreas M Fischer ◽  
Philip Sauré
Keyword(s):  
Exchange Rate ◽  
Policy Change ◽  
Exchange Rate Policy ◽  
Trade Data ◽  
Daily Frequency ◽  
National Bank ◽  
Rate Policy ◽  
Working Day ◽  
Pass Through ◽  
Exchange Rate Pass Through

Abstract On January 15, 2015, the Swiss National Bank discontinued its minimum exchange rate policy of 1 euro against 1.2 Swiss francs. This policy change resulted in a sharp, unanticipated, and permanent appreciation of the Swiss franc by more than 11% against the euro. We analyze the pass-through of this unusually clean exchange rate shock into import unit values at the daily frequency using Swiss transaction-level trade data. Our key findings are twofold. First, for goods invoiced in euros, the pass-through is immediate and complete. Second, for goods invoiced in Swiss francs, the pass-through is partial and exceptionally fast: beginning on the second working day after the exchange rate shock, the medium-run pass-through is reached after 12 working days.

How Structural Macroeconomic Shocks Can Explain Exchange Rate Pass-Through in Developing Countries: A Common Trend Approach

2009 ◽  
Vol 9 (2) ◽  
pp. 1850161 ◽  
Author(s):  
Karim Barhoumi
Keyword(s):  
Developing Countries ◽  
Exchange Rate ◽  
Traditional Approach ◽  
Macroeconomic Shocks ◽  
Structural Shocks ◽  
Long Run ◽  
The Exchange Rate ◽  
Pass Through ◽  
New Formulation ◽  
Exchange Rate Pass Through

This paper investigates the exchange rate pass-through in 12 developing countries during the period 1980-2001 by adopting a new formulation. Rather than considering the traditional approach based on the exogenous exchange rate movement through correlation between exchange rate and prices, we focus on fundamental macroeconomic shocks that affect both exchange rate and prices. In order to do that, we employ long-run restrictions à la Blanchard and Quah (1989) to identify the different shocks through an open economic macroeconomic model (ISLM framework). We use the common trends approach proposed by Warne et al (1992). This allows us to calculate the pass-through as the responses of the exchange rate, CPI and import prices to the supply, the relative demand, the nominal and the foreign prices shocks. We show that the pass-through ratio in developing countries is different when considering different structural shocks.

scholarly journals Transmission Mechanism of Exchange Rate Pass-Through to Domestic Price: The Case of Afghanistan

2020 ◽  
Vol 16 (4) ◽  
pp. 1
Author(s):  
Ajmal Arian ◽  
Arabi U.
Keyword(s):  
Exchange Rate ◽  
Impulse Response Function ◽  
Import Price ◽  
Variance Decomposition ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Effective Exchange Rate

This article investigates the mechanism of exchange rate pass-through to the prices in the context of the Islamic Republic of Afghanistan’s economy. This study explored the magnitude and speed of the pass-through effect on the prices by analyzing quarterly data from 2003 Q1 to 2019 Q2 considering five variables (viz., world food price index, foreign reserves, money supply, import price, and nominal effective exchange rate) based on the Vector Autoregression Model (VAR) with the cointegration and innovation accounting tools such has impulse response function and variance decomposition. The findings of the study suggest that the exchange rate pass-through in Afghanistan is incomplete. The import price is highly responsive in the short-run and moderately responsive an increasingly smooth movement in the long-run. However, CPI in the short-run with swift positive respond but the long-run smooth increasing movement. Furthermore, variance decomposition evidence shows that import price is affected by FR, NEER, CPI, and MS in both short-run and long-run, but the CPI strongly lagged by its variance, WFP, NEER, import price, and MS.

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