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Asymmetric effects of the exchange rate on domestic corporate goods prices

  • Murase, Koichi
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    This paper empirically examines whether there are asymmetric effects of the exchange rate on domestic corporate goods prices when the exchange rate is more volatile. To identify different volatilities in the exchange rate, we employ a threshold regression model. In other words, we define exchange rate volatility as a threshold variable. By using monthly data from Japan, we estimate a threshold parameter and calculate its confidence interval by following Hansen (2000). The results substantiate that the degree of exchange rate pass-through to the aggregated corporate goods price index is higher and more gradually adjusted in a higher exchange rate volatility regime. Furthermore, such asymmetric relationships are clearly found in three disaggregated corporate goods prices: petroleum and coal products, nonferrous metals, and chemicals and related products.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0922142513000078
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    Article provided by Elsevier in its journal Japan and the World Economy.

    Volume (Year): 25-26 (2013)
    Issue (Month): ()
    Pages: 80-89

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    Handle: RePEc:eee:japwor:v:25-26:y:2013:i::p:80-89
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505557

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    1. Jesper Lindé & Marianne Nessén & Ulf Söderström, 2004. "Monetary Policy in an Estimated Open-Economy Model with Imperfect Pass-Through," Working Papers 263, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    15. Otani, Akira & Shiratsuka, Shigenori & Shirota, Toyoichiro, 2003. "The Decline in the Exchange Rate Pass-Through: Evidence from Japanese Import Prices," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(3), pages 53-81, October.
    16. Choudhri, Ehsan U. & Faruqee, Hamid & Hakura, Dalia S., 2005. "Explaining the exchange rate pass-through in different prices," Journal of International Economics, Elsevier, vol. 65(2), pages 349-374, March.
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