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Asymmetry of the Exchange Rate Pass-Through

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  • Jan Przystupa
  • Ewa Wróbel

Abstract

We propose a complex analysis of the exchange rate pass-through in an open economy. We assess the level, linearity, and symmetry of exchange rate pass-through to import and consumer prices in Poland and discuss their implications for monetary policy. We show that the pass-through is incomplete, even in the long run. There is pricing to market behavior in both the long and short runs. We do not find strong evidence of nonlinearity in import prices' reaction to the exchange rate and reject the hypothesis of an asymmetric response to appreciations and depreciations. On the other hand, we find an asymmetry of consumer price index responses to the output gap, direction and size of exchange rate changes, and magnitude of exchange rate volatility. The asymmetry is mostly visible after exogenous shocks. We reject the hypothesis of an asymmetric reaction of prices in a high- and low-inflation environment.

Suggested Citation

  • Jan Przystupa & Ewa Wróbel, 2011. "Asymmetry of the Exchange Rate Pass-Through," Eastern European Economics, Taylor & Francis Journals, vol. 49(1), pages 30-51, January.
  • Handle: RePEc:mes:eaeuec:v:49:y:2011:i:1:p:30-51
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    Cited by:

    1. Nidhaleddine Ben Cheikh, 2012. "Non-linearities in exchange rate pass-through: Evidence from smooth transition models," Economics Bulletin, AccessEcon, vol. 32(3), pages 2530-2545.
    2. repec:ebl:ecbull:eb-16-00537 is not listed on IDEAS
    3. Karol Szafranek, 2016. "Linking excessive disinflation and output movements in an emerging, small open economy A hybrid New Keynesian Phillips Curve perspective," NBP Working Papers 239, Narodowy Bank Polski, Economic Research Department.
    4. repec:ris:betajl:0015 is not listed on IDEAS
    5. Szafranek, Karol, 2017. "Flattening of the New Keynesian Phillips curve: Evidence for an emerging, small open economy," Economic Modelling, Elsevier, vol. 63(C), pages 334-348.
    6. repec:bla:jorssa:v:180:y:2017:i:2:p:587-612 is not listed on IDEAS
    7. Raphael, Brun-Aguerre & Ana-Maria, Fuertes & Matthew, Greenwood-Nimmo, 2016. "Heads I Win, Tails You Lose: Asymmetry in Exchange Rate Pass-Through Into Import Prices," MPRA Paper 71764, University Library of Munich, Germany.

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