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Is pass-through of the exchange rate to restaurant and hotel prices asymmetric in the US? Role of monetary policy uncertainty

Author

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  • Uju Violet Alola

    (Istanbul Gelisim Universit)

  • Ojonugwa Usman

    (Economics and Finance Application and Research Center, Department of Economics, Istanbul Ticaret University)

  • Andrew Adewale Alola

    (Inland Norway University of Applied Sciences
    Nisantasi University)

Abstract

This study examines the exchange rate pass-through to the United States (US) restaurant and hotel prices by incorporating the effect of monetary policy uncertainty over the period 2001:M12 to 2019:M01. Using the nonlinear autoregressive distributed lag (NARDL) model, empirical evidence indicates asymmetric pass-through of exchange rate and monetary policy uncertainty. Moreover, a stronger pass-through effect is observed during depreciation and a negative shock in monetary policy uncertainty, corroborating asymmetric pass-through predictions. Our results further show that a positive shock in energy prices leads to an increase in restaurant and hotel prices. Furthermore, asymmetric causality indicates that a positive shock in the exchange rate causes a positive shock to restaurant and hotel prices. We found feedback causal effects between positive and negative shocks in monetary policy uncertainty and positive and negative shocks in the exchange rate. Additionally, we detected a one-way asymmetric causality, flowing from a positive (negative) shock to a positive (negative) shock in energy prices. Therefore, these findings provide insights for policymakers to achieve low and stable prices in the US restaurant and hotel industry through sound monetary policy formulations.

Suggested Citation

  • Uju Violet Alola & Ojonugwa Usman & Andrew Adewale Alola, 2023. "Is pass-through of the exchange rate to restaurant and hotel prices asymmetric in the US? Role of monetary policy uncertainty," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-19, December.
    • Handle: RePEc:spr:fininn:v:9:y:2023:i:1:d:10.1186_s40854-022-00425-7
    DOI: 10.1186/s40854-022-00425-7
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    References listed on IDEAS

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    1. Selin Güney & Andrés Riquelme & Barry Goodwin, 2023. "An Analysis of the Pass-Through of Exchange Rates in Forest Product Markets," Agriculture, MDPI, vol. 13(3), pages 1-16, February.

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