Long-run exchange rate pass-through: evidence from new panel data techniques
AbstractThis paper examines the exchange rate pass-through (ERPT) into import prices using recent panel data techniques. For a sample of 27 OECD countries, panel cointegration tests provide an evidence for the existence of long-run equilibrium relationship in pass-through equation. Following Pedroni (2001), we employ both FM-OLS and DOLS estimators and show that long-run ERPT elasticity does not exceed 0.70%. Individual estimates of ERPT are heterogeneous across 27 OECD countries, ranging from 0.23% in France to 0.98% in Poland. When we look for the macroeconomic determinants of this long-run heterogeneity, we implement a panel threshold methodology as introduced by Hansen (2000). Our results indicate a regime-dependence of ERPT, that is, countries with higher inflation regime and more exchange rate volatility would experience a higher degree of pass-through.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
Contact details of provider:
Exchange Rate Pass-Through; Import Prices; Panel Cointegration; Panel Threshold;
Other versions of this item:
- Ben Cheikh, Nidhaleddine, 2011. "Long run exchange rate pass-through: Evidence from new panel data techniques," MPRA Paper 39663, University Library of Munich, Germany.
- Nidhaleddine Ben Cheikh, 2012. "Long Run Exchange Rate Pass-Through: Evidence from New Panel Data Techniques," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201225, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barhoumi, Karim, 2006. "Differences in long run exchange rate pass-through into import prices in developing countries: An empirical investigation," Economic Modelling, Elsevier, vol. 23(6), pages 926-951, December.
- Bruce E. Hansen, 1997.
"Threshold effects in non-dynamic panels: Estimation, testing and inference,"
Boston College Working Papers in Economics
365, Boston College Department of Economics.
- Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
- Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June.
- Mark J. Holmes, 2008. "Long-Run Pass-Through From The Exchange Rate To Import Prices In African Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 33(1), pages 97-111, June.
- Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
- Jonathan McCarthy, 2007.
"Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies,"
Eastern Economic Journal,
Eastern Economic Association, vol. 33(4), pages 511-537, Fall.
- Jonathan McCarthy, 2000. "Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies," Staff Reports 111, Federal Reserve Bank of New York.
- J. McCarthy, 1999. "Pass-through of exchange rates and import prices to domestic inflation in some industrialised economies," BIS Working Papers 79, Bank for International Settlements.
- Jose Manuel Campa & Linda S. Goldberg, 2002.
"Exchange rate pass-through into import prices: a macro or micro phenomenon?,"
149, Federal Reserve Bank of New York.
- Campa, Jose M. & Goldberg, Linda S., 2002. "Exchange rate pass-through into import prices: A macro or micro phenomenon?," IESE Research Papers D/475, IESE Business School.
- Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc.
- de Bandt, Olivier & Banerjee, Anindya & Kozluk, Tomasz, 2007.
"Measuring Long-Run Exchange Rate Pass-Through,"
Economics Discussion Papers
2007-32, Kiel Institute for the World Economy.
- Kozluk, Tomasz & Banerjee, Anindya & de Bandt, Olivier, 2008. "Measuring Long-Run Exchange Rate Pass-Through," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(6), pages 1-36.
- Eiji Fuji & Jeannine Bailliu, 2004.
"Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical Investigation,"
Computing in Economics and Finance 2004
135, Society for Computational Economics.
- Jeannine Bailliu & Eiji Fujii, 2004. "Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical Investigation," Working Papers 04-21, Bank of Canada.
- Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003.
"Testing for unit roots in heterogeneous panels,"
Journal of Econometrics,
Elsevier, vol. 115(1), pages 53-74, July.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
- Tom Doan, . "IPSHIN: RATS procedure to implement Im, Pesaran and Shin panel unit root test," Statistical Software Components RTS00098, Boston College Department of Economics.
- Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
- Mark J. Holmes, 2006. "Is a Low-inflation Environment Associated with Reduced Exchange Rate Pass Through?," Finnish Economic Papers, Finnish Economic Association, vol. 19(2), pages 58-68, Autumn.
- repec:ebl:ecbull:v:3:y:2005:i:26:p:1-14 is not listed on IDEAS
- barhoumi karim, 2004.
"Exchange Rate Pass-Through Into Import Prices In Developing Countries: An Empirical Investigation,"
AccessEcon, vol. 28(10), pages A0.
- BARHOUMI Karim, 2005. "Exchange Rate Pass-Through Into Import Prices In Developing Countries: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 3(26), pages 1-14.
- Peter Pedroni, 2004.
"Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis,"
Department of Economics Working Papers
2004-15, Department of Economics, Williams College.
- Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.