scholarly journals Exchange rate pass-through to domestic prices in Namibia: SVAR evidence

2014 ◽  
Vol 7 (1) ◽  
pp. 89-102 ◽  
Author(s):  
Johannes Sheefeni ◽  
Matthew Ocran
Keyword(s):  
Exchange Rate ◽  
Impulse Response ◽  
Price Level ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Domestic Prices ◽  
Variance Decompositions ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through

This article investigates exchange rate pass-through to domestic prices in Namibia. The study covers the period of 1993:Q1 – 2011:Q4, and employed the impulse response functions and variance decompositions obtained from a structural vector autoregressive model. The results from the impulse response functions show that there is a high and long-lasting effect from changes in exchange rates to inflation in Namibia, or high exchange rate pass-through into domestic inflation. The results from the forecast error variance decompositions also reflect that changes in the price level evolve endogenously with changes in the exchange rate. The results are in agreement with the findings of the impulse response functions regarding the significant effect of the exchange rate variable on domestic prices (inflation). The results confirm an incomplete pass-through, indicating that the purchasing power parity theory does not hold, with regard to the price level, in the context of Namibia.

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

2017 ◽  
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.

scholarly journals Does the Incomplete Exchange Rate Pass-through Exist in Sudan?

2021 ◽  
Vol 3 (1) ◽  
pp. 147-163
Author(s):  
Ahmed Abdu Allah Ibrahim ◽  
Mohamed Sharif Bashir
Keyword(s):  
Exchange Rate ◽  
Price Index ◽  
Forecast Error ◽  
Import Price ◽  
Nominal Exchange Rate ◽  
Domestic Price ◽  
Variance Decompositions ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through

The purpose of this paper is to examine the nominal exchange rate pass-through to domestic prices in Sudan from 1978–2017. An autoregressive distributed lag (ARDL) approach to cointegration is employed. The analysis is based on impulse response functions (IRFs) and forecast error variance decompositions (FEVDs). The dynamics of the cointegrated system can be investigated via the variance decompositions and IRFs. The findings confirm that the degree of exchange rate pass-through in Sudan is incomplete, and the empirical results also show that the domestic price index is predominantly caused by foreign price in both the short and long runs, in addition to the import price index and the nominal exchange rate; the exchange rate shock has a negative effect on the domestic price. Furthermore, FEVDs analysis illustrates that the variation in domestic price is primarily determined by the import prices, while changes in the exchange rate are primarily determined by the exchange rate itself.

Estimating Impulse-Response Functions for Macroeconomic Models using Directional Quantiles

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Gabriel Montes-Rojas
Keyword(s):  
Impulse Response ◽  
Reduced Form ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Long Term Effects ◽  
Vector Autoregressive ◽  
Conditional Effects ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Multivariate Quantile

Abstract A multivariate vector autoregressive model is used to construct the distribution of the impulse-response functions of macroeconomics shocks. In particular, the paper studies the distribution of the short-, medium-, and long-term effects after a shock. Structural and reduced form quantile vector autoregressive models are developed where heterogeneity in conditional effects can be evaluated through multivariate quantile processes. The distribution of the responses can then be obtained by using uniformly distributed random vectors. An empirical example of exchange rate pass-through in Argentina is presented.

scholarly journals Exchange Rate Pass-Through in Vietnam under the Impact of Inflationary Environment

2016 ◽  
Vol 23 (03) ◽  
pp. 89-109
Author(s):  
Tho Tran Ngoc ◽  
Trang Nguyen Thi Ngoc
Keyword(s):  
Exchange Rate ◽  
Return To Equilibrium ◽  
Domestic Prices ◽  
Effective Exchange ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Distinct Features ◽  
Effective Exchange Rate ◽  
The Impact

This article addresses the exchange rate pass-through to domestic prices under the impact of inflation. Using TVAR based approach and the variables of inflation, nominal effective exchange rate (NEER), output gap, and interbank rate in addition to monthly data applied to the period of 2000M1–2014M12, we find a non-linear relation in the pass-through to inflation along with the two thresholds of its. Being above or below the thresholds results in different levels of the exchange rate pass-through, which is consistent with previous findings, with unclear/clear evidence found below/above the threshold of 0.3395%/month respectively. In the case of positive shocks of the exchange rate, the inflation is suggested to enormously rise and then return to equilibrium. We also attempt to clarify several distinct features of Vietnam affecting the pass-through and draw a few implications.

scholarly journals EXCHANGE RATE PASS — THROUGH TO DOMESTIC PRICES: EVIDENCE FROM PAKISTAN

2019 ◽  
Vol 2 (1) ◽  
pp. 1-14
Author(s):  
FARHAN AHMED SHAIKH ◽  
SYED MUHAMMAD AHSAN HUSSAIN
Keyword(s):  
Exchange Rate ◽  
Impulse Response ◽  
Price Index ◽  
Consumer Price Index ◽  
Wholesale Price ◽  
Variance Decomposition ◽  
Wholesale Price Index ◽  
Domestic Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through

Exchange Rate Pass — Through is the phenomena that explains to what extent the movements in exchange rate affect macroeconomic variables of any economy. This paper analyses the movements of exchange rate that has affected on wholesale price index, consumer price index, large scale manufacturing, fuel and lightening and the growth of money supply. The data from June 2005 to June 2011 is analyzed by using the econometric framework. In this study, the econometric model, recursive VAR, suggested by McCarthy (2000), is applied in order to measure the movements of exchange rate pass — through to domestic prices by using the impulse response function and variance decomposition. In this study, the results of the impulse response have shown that impact of exchange rate pass through is high on wholesale price index. While the results of the impulse response have shown that the impact of exchange rate pass through is much lower for Consumer Price Index. The result of the variance decomposition has shown that the variance decomposition is indicating that for the CPI variance decomposition is as much as the 5.48 percent. For the WPI the variance decomposition is as much as 10.15 percent and the other variations are explained by the other independent variables.

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.

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.

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