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

The Exchange Rate Pass-Through in a Cointegrated VAR Model

Contents:

Author Info

  • Nidhaleddine Ben Cheikh

    ()
    (ESSCA - Ecole Supérieure des Sciences Commerciales d'Angers - ESSCA)

  • Waël Louhichi

    (ESSCA - Ecole Supérieure des Sciences Commerciales d'Angers - ESSCA)

Abstract

This paper analyzes the exchange rate pass-through (ERPT) into consumer prices for 12 euro area (EA) countries within a cointegrated VAR (CVAR) framework. Using the Johansen cointegration procedure, results indicate the existence of one cointegrating vectors at least for each EA country of our sample. When measuring the long-run effect of exchange rate changes on consumer prices, we found a wide dispersion of ERPT elasticities, especially between "peripheral" and "core" EA economies. For instance, consumer prices rise by 84% in Portugal following one percent depreciation of exchange rate, while for the German economy the extent of pass-through is not exceeding 0.20%. Besides, the loading factors point out a very slow adjustment of consumer prices towards their long-run equilibrium across EA countries, explaining the weakness of ERPT estimates in the short-run.

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://halshs.archives-ouvertes.fr/docs/00/93/77/84/PDF/Paper_NW.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00879270.

as in new window
Length:
Date of creation: 25 Oct 2013
Date of revision:
Handle: RePEc:hal:wpaper:halshs-00879270

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00879270
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: Exchange Rate Pass-Through; Inflation; Cointegration;

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. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  2. 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.
  3. Candelon, Bertrand & Lutkepohl, Helmut, 2001. "On the reliability of Chow-type tests for parameter constancy in multivariate dynamic models," Economics Letters, Elsevier, vol. 73(2), pages 155-160, November.
  4. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange rate pass-through into import prices: a macro or micro phenomenon?," Staff Reports 149, Federal Reserve Bank of New York.
  5. Ca' Zorzi, Michele & Hahn, Elke & Sánchez, Marcelo, 2007. "Exchange rate pass-through in emerging markets," Working Paper Series 0739, European Central Bank.
  6. 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.
  7. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  8. 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.
  9. Hamid Faruqee & Dalia Hakura & Ehsan U. Choudhri, 2002. "Explaining the Exchange Rate Pass-Through in Different Prices," IMF Working Papers 02/224, International Monetary Fund.
  10. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  11. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
  12. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
  13. Hamid Faruqee, 2006. "Exchange Rate Pass-Through in the Euro Area," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 4.
Full references (including those not matched with items on IDEAS)

Citations

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:hal:wpaper:halshs-00879270. 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: (CCSD).

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.