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Revisiting the decline in the exchange rate pass-through: further evidence from developing countries

  • Jamel JOUINI

    ()

    (F.S.E.G.N. and L.E.G.I., Université 7 Novembre de Carthage, Tunisie and GREQAM, Université de la Méditerranée, France)

  • Karim BARHOUMI

    ()

    (GREQAM, Université de la Méditerranée, France and Economics Department of Macquarie University, Australia)

In this paper, we revisit the Taylor (2000) proposition for some developing countries in order to examine the decline in their pass-through coefficients, and to find possible explanations for this. Our work is motivated by the fact that during the 1990s, some developing countries shifted their monetary policy in order to reduce the inflation. We adopt a methodology based on structural break and cointegration approaches proposed by Bai and Perron (1998), and Gregory and Hansen (1996), respectively. These techniques allow identifying the inflation decline and adopting a long-run approach which is ignored in some empirical works related to the pass-through.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2008)
Issue (Month): 20 ()
Pages: 1-10

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Handle: RePEc:ebl:ecbull:eb-07c20152
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  1. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc.
  2. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
  3. 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.
  4. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
  5. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  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. Jouini, Jamel & Boutahar, Mohamed, 2005. "Evidence on structural changes in U.S. time series," Economic Modelling, Elsevier, vol. 22(3), pages 391-422, May.
  8. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
  9. Michael B. Devereux & James Yetman, 2001. "Predetermined Prices and the Persistent Effects of Money on Output," Working Papers 01-13, Bank of Canada.
  10. Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
  11. 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.
  12. Frankel, Jeffrey & Parsley, David & Wei, Shang-Jin, 2005. "Slow Passthrough Around the World: A New Import for Developing Countries?," Working Paper Series rwp05-016, Harvard University, John F. Kennedy School of Government.
  13. barhoumi karim, 2004. "Exchange Rate Pass-Through Into Import Prices In Developing Countries: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 28(10), pages A0.
  14. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  15. Joseph E. Gagnon & Jane Ihrig, 2001. "Monetary policy and exchange rate pass-through," International Finance Discussion Papers 704, Board of Governors of the Federal Reserve System (U.S.).
  16. Barhoumi, Karim, 2006. "Differences in long run exchange rate pass-through into import prices in developing countries: An empirical investigation," Economic Modelling, Elsevier, vol. 23(6), pages 926-951, December.
  17. Peter Hooper & Catherine L. Mann, 1989. "Exchange Rate Pass-through in the 1980s: The Case of U.S. Imports of Manufactures," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 297-337.
  18. repec:ebl:ecbull:v:3:y:2005:i:26:p:1-14 is not listed on IDEAS
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