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Exchange rate pass-through in a small open economy: the Anglo-Irish case

  • Eleanor Doyle
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    Bilateral import unit values are constructed to investigate the extent and speed of exchange rate and production cost pass-through into the unit values of Irish imports (total and sectoral) from the UK using Menon's (1996) mark-up model. The approach used to measure exchange rate pass-through is based on cointegration and error-correction modelling and the period of analysis is from 1979 to 1995. Full pass-through from the bilateral Irish pound-Sterling exchange rate and from UK producer costs could not be rejected for total and sectoral import unit values for the sample period 1979q1-1995q4. This implies no role for domestic competing prices in explaining the long-run relationship determining unit values of Irish imports from the UK. The results indicate that for aggregate and sectoral unit values of Irish imports from the UK pass-through is incomplete in the short-run.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840410001682142
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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 36 (2004)
    Issue (Month): 5 ()
    Pages: 443-455

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    Handle: RePEc:taf:applec:v:36:y:2004:i:5:p:443-455
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