Exchange rate pass-through to domestic prices in the Central European countries
AbstractExchange rate plays an important role in transmitting pressures from the external shocks to the domestic economy. Development of inflation in the domestic economy is significantly determined by the ability of exchange rate to transmit external price related pressures to the domestic market. Considering the new EU member countries obligation to adopt euro the loss of the monetary sovereignty should be analyzed not only in the view of the direct positive and negative effects of this decision but also in the view of many indirect effects. While the exchange rates of majority of the EMU candidate countries are strongly affected by the euro exchange rate on the international markets there is still room for them to float partially reflecting changes in the national economic development. Ability of the exchange rate to transfer external shocks to the national economy remains one of the most discussed areas relating to the current stage of the monetary integration process in the European single market. In the paper we analyze the ability of the exchange rate to weaken or eventually to strengthen the transmission of the external inflation pressures to the national economy in the Czech republic, Hungary, Poland and the Slovak republic. In order to meet this objective we estimate a vector autoregression (VAR) model correctly identified by the Cholesky decomposition of innovations that allows us to identify structural shocks hitting the model. Variance decomposition and impulse-response functions are computed in order to estimate the exchange rate pass-through from the foreign prices of import to the domestic consumer price indexes in the Visegrad countries. Ordering of the endogenous variables in the model is also considered allowing us to check the robustness of the empirical results.
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 University Library of Munich, Germany in its series MPRA Paper with number 19282.
Date of creation: Jul 2009
Date of revision:
Publication status: Published in Journal of Applied Economic Sciences 3.4(2009): pp. 408-424
exchange rate; inflation; VAR; Cholesky decomposition; variance decomposition; impulse-response function;
Other versions of this item:
- Rajmund MIRDALA, 2009. "Exchange Rate Pass-Through To Domestic Prices In The Central European Countries," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(3(9)_Fall).
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-19 (All new papers)
- NEP-CBA-2009-12-19 (Central Banking)
- NEP-IFN-2009-12-19 (International Finance)
- NEP-MON-2009-12-19 (Monetary Economics)
- NEP-OPM-2009-12-19 (Open Economy Macroeconomics)
- NEP-TRA-2009-12-19 (Transition Economics)
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.:
- José M. Campa & Linda S. Goldberg & José M. González-Mínguez, 2005.
"Exchange rate pass through to import prices in the euro area,"
Banco de Espaï¿½a Working Papers
0538, Banco de Espa�a.
- José Manuel Campa & Linda S. Goldberg & José M. González-Mínguez, 2005. "Exchange-Rate Pass-Through to Import Prices in the Euro Area," NBER Working Papers 11632, National Bureau of Economic Research, Inc.
- Jose Manuel Campa & Linda S. Goldberg & Jose M. Gonzalez-Minguez, 2005. "Exchange rate pass-through to import prices in the Euro area," Staff Reports 219, Federal Reserve Bank of New York.
- Campa, Jose M. & Goldberg, Linda S. & Gonzalez-Minguez, Jose M., 2005. "Exchange-rate pass-through to import prices in the euro area," IESE Research Papers D/609, IESE Business School.
- Campa, José Manuel & Goldberg, Linda S & González Mìnguez, Jose Manuel, 2005. "Exchange Rate Pass-Through to Import Prices in the Euro Area," CEPR Discussion Papers 5347, C.E.P.R. Discussion Papers.
- Jaromír Šindel & Stanislav Šaroch, 2008. "The political economy of exchange rate policy in central and east european countries - sector approach," Politická ekonomie, University of Economics, Prague, vol. 2008(1), pages 17-39.
- Ca' Zorzi, Michele & Hahn, Elke & Sánchez, Marcelo, 2007.
"Exchange rate pass-through in emerging markets,"
Working Paper Series
0739, European Central Bank.
- Takatoshi Ito & Kiyotaka Sato, 2006.
"Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through,"
06018, Research Institute of Economy, Trade and Industry (RIETI).
- Takatoshi Ito & Kiyotaka Sato, 2006. "Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through," NBER Working Papers 12395, National Bureau of Economic Research, Inc.
- Takatoshi Ito & Kiyotaka Sato, 2006. "Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through," CIRJE F-Series CIRJE-F-406, CIRJE, Faculty of Economics, University of Tokyo.
- Rajmund MIRDALA, 2009.
"Shocking Aspects Of Monetary Integration (Svar Approach),"
Journal of Applied Research in Finance Bi-Annually,
ASERS Publishing, vol. 0(1), pages 52-62, June.
- Mirdala, Rajmund, 2009. "Shocking aspects of monetary integration (SVAR approach)," MPRA Paper 17057, University Library of Munich, Germany.
- Nabil Ben Arfa, 2009. "Analysis of Shocks Affecting Europe: EMU and some Central and Eastern Acceding Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(1), pages 21-38, March.
- Carlos Cortinhas, 2009.
"Exchange Rate Pass-Through In Asean: Implications For The Prospects Of Monetary Integration In The Region,"
The Singapore Economic Review (SER),
World Scientific Publishing Co. Pte. Ltd., vol. 54(04), pages 657-687.
- Carlos Cortinhas, 2007. "Exchange Rate Pass-Through in ASEAN: Implications for the Prospects of Monetary Integration in the Region," NIPE Working Papers 2/2007, NIPE - Universidade do Minho.
- Roberto CELLINI & Alessandro PAOLINO, 2009. "Us Price Indices And The Exchange Rate: Are Recreational Products Different?," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(1(7)_ Spr).
- Stavarek Daniel, 2008.
"Exchange Market Pressure in Central European Countries from the Eurozone Membership Perspective,"
South East European Journal of Economics and Business,
De Gruyter Open, vol. 3(2), pages 7-18, November.
- Stavarek, Daniel, 2008. "Exchange Market Pressure in Central European Countries from the Eurozone Membership Perspective," MPRA Paper 12079, University Library of Munich, Germany.
- Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2008. "Comprehensive macro-model for the U.S. economy," MPRA Paper 9808, University Library of Munich, Germany.
- Kosta Josifidis & Jean-Pierre Allegret & Emilija Beker Pucar, 2009.
"Monetary and Exchange Rate Regimes Changes: The Cases of Poland, Czech Republic, Slovakia and Republic of Serbia,"
Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 199-226, June.
- Kosta Josifidis & Jean-Pierre Allegret & Emilija Beker Pucar, 2009. "Monetary and Exchange Rate Regimes Changes: The Cases of Poland, Czech Republic, Slovakia and Republic of Serbia," Post-Print halshs-00404729, HAL.
- Toshitaka Sekine, 2006. "Time-varying exchange rate pass-through: experiences of some industrial countries," BIS Working Papers 202, Bank for International Settlements.
- Rajmund Mirdala, 2010.
"Sources of Exchange Rate Dynamics in the European Transition Economies,"
Journal of Advanced Studies in Finance,
ASERS Publishing, vol. 0(1), pages 60-71, June.
- Mirdala, Rajmund, 2010. "Sources of exchange rate dynamics in the European transition economies," MPRA Paper 25771, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.