scholarly journals Nonlinear pass-through of exchange rate shocks on inflation : a bayesian smooth transition VAR approach

2016 ◽  
Author(s):  
Hernán Rincón-Castro ◽  
Norberto Rodríguez-Niño
Keyword(s):  
Exchange Rate ◽  
Smooth Transition ◽  
Exchange Rate Shocks ◽  
Pass Through

scholarly journals Exchange rate pass-through to inflation in Egypt: a structural VAR approach

2018 ◽  
Vol 3 (2) ◽  
pp. 2-19 ◽  
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.

Do Economic Growth Regimes Impact the Pass-Through of Exchange Rate Shocks to Inflation?

2017 ◽  
pp. 309-321
Author(s):  
Eliphas Ndou ◽  
Nombulelo Gumata
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Exchange Rate Shocks ◽  
Pass Through

scholarly journals Inflation Dynamics and Exchange Rate Pass-Through in Nigeria: Evidence from Augmented Nonlinear New Keynesian Philips Curve

2020 ◽  
pp. 109-138
Author(s):  
Usman A. Bello ◽  
Aliyu R. Sanusi
Keyword(s):  
Exchange Rate ◽  
New Keynesian ◽  
Smooth Transition ◽  
Necessary Condition ◽  
Regime Switch ◽  
High Inflation ◽  
Smooth Transition Regression ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Smooth Transition Regression Model

This paper estimates a nonlinear augmented New Keynesian Philips Curve for Nigeria using the Smooth Transition Regression model for the period 1995Q1 to 2018Q2. The empirical evidence reveals the existence of two inflation regimes during the period under review. Food inflation, energy inflation, firms’ marginal cost, and imported inflation account for most of the changes in the prices of composite consumers’ basket in low exchange rate depreciation regime. However, the exchange rate solely explains price changes in the composite consumers’ basket when inflation switches to high regime. Similarly, the results show that regime change in inflation is largely caused by exchange rate (transition variable) depreciation or devaluation of the naira. Furthermore, the paper finds that the threshold in exchange rate devaluation (depreciation) that triggers a regime switch from low to high inflation regime is about N75 relative to a dollar. The speed of regime switch was found to be significantly high at about 70% per quarter. The paper argues that achieving exchange rate stability is a necessary condition for disinflation during this regime. Therefore, this paper recommends that monetary policy response to low inflation regime must target the various components of the consumption basket while effort to curtail persistent high inflation must include a stable exchange rate of the naira.

scholarly journals Exchange Rate Shocks and Quality Adjustments

2021 ◽  
pp. 1-45
Author(s):  
Daniel Goetz ◽  
Alexander Rodnyansky
Keyword(s):  
Exchange Rate ◽  
Product Line ◽  
Consumer Expenditure ◽  
High Quality ◽  
Relative Decrease ◽  
Expenditure Switching ◽  
Exchange Rate Shocks ◽  
Pass Through

Abstract Do firms respond to cost shocks by reducing the quality of their products? Using microdata from a large Russian retailer that refreshes its product line twice-yearly, we document that higher quality products are more profitable than lower quality ones, but that the number of high quality products experiences a relative decrease after a large ruble devaluation in 2014. We show that rising firm costs–and not shrinking consumer incomes–explains the reallocation, and rationalize the data with a model that features consumer expenditure switching between high and low qualities. The reallocation to lower quality products reduces average pass-through by 26%.

scholarly journals Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration

2017 ◽  
Vol 107 (1) ◽  
pp. 249-282 ◽  
Author(s):  
Yuriy Gorodnichenko ◽  
Oleksandr Talavera
Keyword(s):  
Exchange Rate ◽  
International Comparisons ◽  
The United States ◽  
Nominal Exchange Rate ◽  
Retail Sector ◽  
Price Setting ◽  
Online Markets ◽  
Basic Facts ◽  
Exchange Rate Shocks ◽  
Pass Through

We document basic facts about prices in online markets in the United States and Canada, which is a rapidly growing segment of the retail sector. Relative to prices in regular stores, prices in online markets are more flexible and exhibit stronger pass-through (60–75 percent) and faster convergence (half-life less than two months) in response to movements of the nominal exchange rate. Multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks. Properties of goods, sellers, and markets are systematically related to pass-through and the speed of price adjustment for international price differentials. (JEL F31, F41, L11, L81)

scholarly journals Exchange rate pass-through into inflation in Vietnam: evidence from VAR model

2019 ◽  
Vol 21 (2) ◽  
pp. 144-155
Author(s):  
Van Anh Pham
Keyword(s):  
Exchange Rate ◽  
Design Methodology ◽  
Var Model ◽  
Content Type ◽  
Vector Autoregression Model ◽  
Variance Decompositions ◽  
Autoregression Model ◽  
Exchange Rate Shocks ◽  
Pass Through ◽  
Exchange Rate Pass Through

Purpose The purpose of this paper is to examine and analyze the exchange rate pass-through into inflation (ERPT) in Vietnam. Design/methodology/approach The paper examines and analyzes the ERPT in Vietnam by applying vector autoregression model over the period 2008‒2018. Findings The key finding of the research is that from the impulse response results, the transmission of exchange rate shocks to inflation is significant in Vietnam, and this is incomplete exchange rate pass-through. Moreover, the evidence from variance decompositions argues that exchange rate is an important factor to explain the fluctuation of inflation. Originality/value In overall, the depreciation or appreciation of exchange rate in Vietnam will considerably impact inflation.

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