Advanced Search
MyIDEAS: Login to save this paper or follow this series

Exchange rate pass-through to Estonian prices

Contents:

Author Info

  • Aurelijus Dabušinskas

    ()

Registered author(s):

    Abstract

    The objective of the paper is to further our understanding of the relationship between changes in the nominal exchange rate and prices in a small open economy. The paper uses data from 1995 Q1-2003 Q1 for Estonia to investigate the exchange rate pass-through to import, producer and consumer prices, both total and disaggregated. Although the currency board arrangement eliminates exchange rate fluctuations from a very significant share of the Estonian effective currency basket, the remaining variation in the nominal exchange rate can be regarded as exogenous (determined by the anchor currency), a useful feature when estimating the pass-through. In the case of import unit values, the pass-through tends to be statistically significant for textiles and commodity-type goods, such as petroleum, non-metal mineral products and basic metals. In the case of producer prices, the long-run pass-through is evident in textiles and chemical products. Point estimates of the long-run pass-through to aggregate import and producer prices fall between 40 and 50%, though the precision of these estimates is low. In contrast, no significant exchange rate pass-through is estimated to consumer prices, measured by total CPI or its tradable component.

    Download Info

    If 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.
    File URL: http://www.eestipank.info/pub/en/dokumendid/publikatsioonid/seeriad/uuringud/_2003/_10_2003/wp_1003.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number 2003-10.

    as in new window
    Length:
    Date of creation: 10 Dec 2003
    Date of revision: 10 Dec 2003
    Publication status: published
    Handle: RePEc:eea:boewps:wp2003-10

    Contact details of provider:
    Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
    Phone: +3726680719
    Fax: +3726680900
    Email:
    Web page: http://www.bankofestonia.info
    More information through EDIRC

    Order Information:
    Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
    Email:

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. 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.
    2. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    3. Billmeier, Andreas & Bonato, Leo, 2004. "Exchange rate pass-through and monetary policy in Croatia," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 426-444, September.
    4. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
    5. Maurice Obstfeld & Kenneth Rogoff, 1999. "New Directions for Stochastic Open Economy Models," NBER Working Papers 7313, National Bureau of Economic Research, Inc.
    6. Lane, Philip R., 2001. "The new open economy macroeconomics: a survey," Journal of International Economics, Elsevier, vol. 54(2), pages 235-266, August.
    7. Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
    8. 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.
    9. Giancarlo Corsetti & Paolo Pesenti, 2001. "International dimensions of optimal monetary policy," Staff Reports 124, Federal Reserve Bank of New York.
    10. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
    11. Charles Engel, 2002. "The Responsiveness of Consumer Prices to Exchange Rates And the Implications for Exchange-Rate Policy: A Survey Of a Few Recent New Open-Economy..," NBER Working Papers 8725, National Bureau of Economic Research, Inc.
    12. Giancarlo Corsetti & Paolo Pesenti, 2002. "Self-validating optimum currency areas," Staff Reports 152, Federal Reserve Bank of New York.
    13. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
    14. Maurice Obstfeld, 2003. "International Macroeconomics: Beyond the Mundell-Fleming Model," International Finance 0303006, EconWPA.
    15. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
    16. Charles Engel, 1999. "Local-Currency Pricing and the Choice of Exchange-Rate Regime," Discussion Papers in Economics at the University of Washington 0036, Department of Economics at the University of Washington.
    17. Urmas Sepp & Andres Vesilind & Ülo Kaasik, 2000. "Estonian Inflation Model," Bank of Estonia Working Papers 2000-1, Bank of Estonia, revised 10 Oct 2000.
    18. Dalia Hakura & Ehsan U. Choudhri, 2001. "Exchange Rate Pass-Through to Domestic Prices," IMF Working Papers 01/194, International Monetary Fund.
    19. Darvas, Zsolt, 2001. "Exchange rate pass-through and real exchange rate in EU candidate countries," Discussion Paper Series 1: Economic Studies 2001,10, Deutsche Bundesbank, Research Centre.
    20. Nikolay Gueorguiev, 2003. "Exchange Rate Pass-Through in Romania," IMF Working Papers 03/130, International Monetary Fund.
    21. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    22. Michael B. Devereux & Charles Engel, 2001. "Endogenous Currency of Price Setting in a Dynamic Open Economy Model," NBER Working Papers 8559, National Bureau of Economic Research, Inc.
    23. Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc.
    24. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    25. Choudhri, Ehsan U. & Faruqee, Hamid & Hakura, Dalia S., 2005. "Explaining the exchange rate pass-through in different prices," Journal of International Economics, Elsevier, vol. 65(2), pages 349-374, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Coricelli, Fabrizio & Égert, Balázs & MacDonald, Ronald, 2006. "Monetary transmission mechanism in Central and Eastern Europe: Gliding on a wind of change," BOFIT Discussion Papers 8/2006, Bank of Finland, Institute for Economies in Transition.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eea:boewps:wp2003-10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peeter Luikmel).

    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.