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

Exchange Rate Pass-Through to Domestic Inflation in Hong Kong

Contents:

Author Info

  • Li-gang Liu

    (Research Department, Hong Kong Monetary Authority)

  • Andrew Tsang

    (Research Department, Hong Kong Monetary Authority)

Registered author(s):

    Abstract

    This paper estimates pass-through of exchange rate changes to domestic inflation in Hong Kong in a two-step approach. We first estimate exchange rate pass-through to import prices and then from import price to domestic inflation using a Phillips-Curve model. We find that Hong Kong¡¦s exchange rate pass-through to import prices is relatively high compared to the OECD average, although Hong Kong also witnessed a decline of pass-through after 1991. With respect to exchange rate pass-through to domestic prices, we find that a 10% depreciation of the US dollar against all currencies except for the Hong Kong dollar would lead domestic prices to increase by 0.82 and 1.61 percent in the short run and medium run, respectively. These results are also broadly consistent with those obtained from a calibration exercise that estimates exchange rate pass-through to domestic prices via channels of the tradable and non-tradable goods.

    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.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP08_02_full.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Hong Kong Monetary Authority in its series Working Papers with number 0802.

    as in new window
    Length: 23 pages
    Date of creation: Mar 2008
    Date of revision:
    Handle: RePEc:hkg:wpaper:0802

    Contact details of provider:
    Postal: 55th Floor, Two International Finance Centre, 8 Finance Street, Central
    Phone: (852)28788261
    Fax: (852)28781892
    Email:
    Web page: http://www.info.gov.hk/hkma/
    More information through EDIRC

    Related research

    Keywords: Exchange rate pass-through; Phillips Curve; Hong Kong;

    Find related papers by JEL classification:

    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. Campa, José Manuel & Goldberg, Linda S, 2006. "Distribution Margins, Imported Inputs and the Insensitivity of the CPI to Exchange Rates," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5650, C.E.P.R. Discussion Papers.
    2. Jose Manuel Campa & Linda S. Goldberg, 2006. "Pass-through of exchange rates to consumption prices: what has changed and why," Staff Reports, Federal Reserve Bank of New York 261, Federal Reserve Bank of New York.
    3. Maurice Obstfeld & Kenneth Rogoff, 2000. "New Directions for Stochastic Open Economy Models," International Finance, EconWPA 0004002, EconWPA.
    4. Hans Genberg & LaurentL. Pauwels, 2005. "Wage-Price Dynamics And Deflation In Hong Kong," Pacific Economic Review, Wiley Blackwell, Wiley Blackwell, vol. 10(2), pages 191-216, 06.
    5. Giancarlo Corsetti & Luca Dedola, 2002. "Macroeconomics of international price discrimination," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 461, Bank of Italy, Economic Research and International Relations Area.
    6. Giovanni P. Olivei, 2002. "Exchange rates and the prices of manufacturing products imported into the United States," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Q 1, pages 3 - 18.
    7. Burstein, Ariel T. & Neves, Joao C. & Rebelo, Sergio, 2003. "Distribution costs and real exchange rate dynamics during exchange-rate-based stabilizations," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(6), pages 1189-1214, September.
    8. repec:nbr:nberwo:12547 is not listed on IDEAS
    9. Campa, José Manuel & Goldberg, Linda S, 2004. "Exchange Rate Pass-Through into Import Prices," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4391, C.E.P.R. Discussion Papers.
    10. David Gruen & Adrian Pagan & Christopher Thompson, 1999. "The Phillips Curve in Australia," RBA Research Discussion Papers, Reserve Bank of Australia rdp1999-01, Reserve Bank of Australia.
    11. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2246, C.E.P.R. Discussion Papers.
    12. Li-gang Liu & Jian Chang & Andrew Tsang, 2006. "Forecasting the Non-Rental Component of Hong Kong's CCPI Inflation - an Indicator Approach," Working Papers, Hong Kong Monetary Authority 0603, Hong Kong Monetary Authority.
    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. Matthew Kofi Ocran, 2010. "Exchange Rate Pass-Through To Domestic Prices: The Case of South Africa," Prague Economic Papers, University of Economics, Prague, University of Economics, Prague, vol. 2010(4), pages 291-306.

    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:hkg:wpaper:0802. 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: (Simon Chan).

    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.