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Exchange Rate Pass-through (ERPT) into Domestic Prices: Evidence from a Nonlinear Perspective

Author

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  • Siew-Voon Soon

    (Universiti Putra Malaysia)

  • Ahmad Zubaidi Baharumshah

    (Universiti Putra Malaysia)

Abstract

This paper uses a Markov-switching intercept autoregressive heteroskedasticity model to examine inflation dynamics and the exchange rate pass-through (ERPT) in Malaysia. Two different regimes are identified in the sample period (1990:Q1–2015:Q4). The results confirm a partial ERPT to domestic consumer prices, but the effect of exchange rates on domestic prices is asymmetry. The incomplete ERPT to the consumer price index is consistent with findings in earlier studies. We also confirm a positive but time-varying impact of terms of trade shocks on inflation.

Suggested Citation

  • Siew-Voon Soon & Ahmad Zubaidi Baharumshah, 2017. "Exchange Rate Pass-through (ERPT) into Domestic Prices: Evidence from a Nonlinear Perspective," Economics Bulletin, AccessEcon, vol. 37(2), pages 1160-1167.
    • Handle: RePEc:ebl:ecbull:eb-15-00520
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    References listed on IDEAS

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    More about this item

    Keywords

    endogenous multiple breaks; exchange rate; inflation;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance

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