Nonlinear Mechanism of the Exchange Rate Pass-Through: Does Business Cycle Matter?
AbstractThis paper examines the presence of nonlinear mechanism in the exchange rate pass-through (ERPT) to CPI inflation for 12 euro area (EA) countries. Using logistic smooth transition models, we explore the existence of nonlinearity with respect to economic activity along the business cycle. Our results provide a strong evidence of nonlinearity in 6 out of 12 EA countries with significant differences in the degree of ERPT between the periods of expansion and recession. However, we find no clear direction in this regime-dependence of pass-through to business cycle. In some countries, ERPT is higher during expansions than in recessions; however, in other countries, this result is reversed. These cross-country differences in the nonlinear mechanism of pass-through would have important implications for the design of monetary policy and the control of inflation in the EA context.
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 InfoPaper provided by HAL in its series Working Papers with number halshs-00731502.
Date of creation: 10 Sep 2012
Date of revision:
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00731502
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Exchange Rate Pass-Through; Inflation; Smooth Transition Regression;
Other versions of this item:
- Nidhaleddine Ben Cheikh, 2013. "Nonlinear Mechanism of the Exchange Rate Pass-Through: Does Business Cycle Matter?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201306, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
- Ben Cheikh, Nidhaleddine, 2012. "Nonlinear mechanism of the exchange rate pass-through: Does business cycle matter?," MPRA Paper 41179, University Library of Munich, Germany.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-EEC-2012-09-30 (European Economics)
- NEP-MAC-2012-09-30 (Macroeconomics)
- NEP-MON-2012-09-30 (Monetary Economics)
- NEP-OPM-2012-09-30 (Open Economy Macroeconomic)
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.:
- Mario Marazzi & Nathan Sheets & Robert J. Vigfusson & Jon Faust & Joseph Gagnon & Jaime Marquez & Robert F. Martin & Trevor Reeve & John Rogers, 2005. "Exchange rate pass-through to U.S. import prices: some new evidence," International Finance Discussion Papers 833, Board of Governors of the Federal Reserve System (U.S.).
- .De Bandt, O. & Banerjee, A. & Kozluk, T., 2007.
"Measuring Long-Run Exchange Rate Pass-Through,"
173, Banque de France.
- 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.
- Eitrheim, Oyvind & Terasvirta, Timo, 1996.
"Testing the adequacy of smooth transition autoregressive models,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 59-75, September.
- Eitrheim, Øyvind & Teräsvirta, Timo, 1995. "Testing the Adequacy of Smooth Transition Autoregressive Models," Working Paper Series in Economics and Finance 56, Stockholm School of Economics.
- Pinelopi K. Goldberg & Michael M. Knetter, 1996.
"Goods Prices and Exchange Rates: What Have We Learned?,"
NBER Working Papers
5862, National Bureau of Economic Research, Inc.
- 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.
- Patricia S. Pollard & Cletus C. Coughlin, 2004. "Size matters: asymmetric exchange rate pass-through at the industry level," Working Papers 2003-029, Federal Reserve Bank of St. Louis.
- Mototsugu Shintani & Akiko Terada-hagiwara & Tomoyoshi Yabu, 2012.
"Exchange rate pass-through and inflation: a nonlinear time series analysis,"
Vanderbilt University Department of Economics Working Papers
vuecon-12-00008, Vanderbilt University Department of Economics.
- Shintani, Mototsugu & Terada-Hagiwara, Akiko & Yabu, Tomoyoshi, 2013. "Exchange rate pass-through and inflation: A nonlinear time series analysis," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 512-527.
- Mototsugu Shintani & Akiko Terada-Hagiwara & Tomoyoshi Yabu, 2009. "Exchange Rate Pass-Through and Inflation: A Nonlinear Time Series Analysis," Vanderbilt University Department of Economics Working Papers 0920, Vanderbilt University Department of Economics.
- Jeannine Bailliu & Eiji Fujii, 2004.
"Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical Investigation,"
04-21, Bank of Canada.
- 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.
- van Dijk, D.J.C. & Terasvirta, T. & Franses, Ph.H.B.F., 2000.
"Smooth transition autoregressive models - A survey of recent developments,"
Econometric Institute Research Papers
EI 2000-23/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Dick van Dijk & Timo Terasvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models — A Survey Of Recent Developments," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 1-47.
- van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000. "Smooth Transition Autoregressive Models - A Survey of Recent Developments," Working Paper Series in Economics and Finance 380, Stockholm School of Economics, revised 17 Jan 2001.
- Valerie Herzberg & George Kapetanios & Simon Price, 2003. "Import prices and exchange rate pass-through: theory and evidence from the United Kingdom," Bank of England working papers 182, Bank of England.
- Reginaldo P. Nogueira Junior & Miguel Leon-Ledesma, 2008. "Exchange Rate Pass-Through Into Inflation: The Role of Asymmetries and NonLinearities," Studies in Economics 0801, Department of Economics, University of Kent.
- Arnildo da Silva Correa & André Minella, 2006.
"Nonlinear Mechanisms of the Exchange Rate Pass-Through: a Phillips curve model with threshold for Brazil,"
Working Papers Series
122, Central Bank of Brazil, Research Department.
- Arnildo da Silva Correa & André Minella, 2010. "Nonlinear mechanisms of the exchange rate pass-through: A Phillips curve model with threshold for Brazil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 64(3), pages 231-243, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.