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Exchange Rate Pass-Through Effects: A Disaggregate Analysis of Colombian Imports of Manufactured Goods

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  • Hernán Rincón

    ()

  • Edgar Caicedo

    ()

  • Norberto Rodríguez

    ()

Abstract

Colombian monthly data covering the period from 1995:01 to 2002:11 and ECM, fixed and time-varying parameters and Kalman filter techniques are used in this paper to quantify the exchange rate pass-through effects on import prices within a sample of manufactured imports. Also, whether the foreign exchange and inflation regimes affect the degree of pass-through is evaluated. The analytical framework used was a mark-up model. The main finding is that the long-run pass-through elasticities for the industries in the sample are stable and go from 0.1 to 0.8 and the short-run ones are unstable and go from 0.1 to 0.7, supporting mark-up hypotheses, in contrast to the hypotheses of perfect market competition and complete pass-through. The findings also show evidence of the variability and different degrees of pass-trough among manufacturing sectors, which confirm the importance of using dynamic models and disaggregate data for an analysis of the pass-through. Both, the hypothesis that under a floating regime there is a low degree of pass-through and the hypothesis that a low inflation environment has the same result are not supported.

Suggested Citation

  • Hernán Rincón & Edgar Caicedo & Norberto Rodríguez, 2005. "Exchange Rate Pass-Through Effects: A Disaggregate Analysis of Colombian Imports of Manufactured Goods," Borradores de Economia 330, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:330
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    References listed on IDEAS

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    Cited by:

    1. Dubravko Mihaljek & Marc Klau, 2008. "Exchange rate pass-through in emerging market economies: what has changed and why?," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 103-130 Bank for International Settlements.
    2. Juan Carlos Parra Alvarez, 2008. "Sensibilidad del IPC a la Tasa de Cambio en Colombia: Una Medición de Largo Plazo," Borradores de Economia 542, Banco de la Republica de Colombia.
    3. Ludek Niedermayer, 2008. "Notes on the monetary transmission mechanism in the Czech economy," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 213-219 Bank for International Settlements.
    4. Hernando Vargas, 2008. "The transmission mechanism of monetary policy in Colombia: major changes and current features," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 183-211 Bank for International Settlements.
    5. Julián Pérez Amaya, 2006. "Evaluación De Reglas De Tasa De Interés En Un Modelo De Economía Pequeña Y Abierta," BORRADORES DE ECONOMIA 002638, BANCO DE LA REPÚBLICA.
    6. repec:bdr:ensayo:v:35:y:2017:i:83:p:161-187 is not listed on IDEAS
    7. Andrés González & Omar mendoza & Hernán Rincón & Norberto Rodríguez, 2010. "Ciclo económico y efecto inflacionario de la depreciación de la moneda," BORRADORES DE ECONOMIA 007194, BANCO DE LA REPÚBLICA.
    8. Carmen Astrid Romero, 2012. "El efecto transmisión del tipo de cambio en Colombia durante los años de la industrialización," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 30(67), pages 216-251, July.
    9. Hernán Rincón & Diego Rodríguez & Jorge Toro & Santiago Téllez, 2017. "FISCO: modelo fiscal para Colombia," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 35(83), pages 161-187, Junio.
    10. Rafael Puyana Martínez-Villaba, 2010. "El efecto Balassa-Samuelson en Colombia," Borradores de Economia 630, Banco de la Republica de Colombia.
    11. Rafael Puyana, 2010. "El efecto Balassa-Samuelson en Colombia," BORRADORES DE ECONOMIA 007801, BANCO DE LA REPÚBLICA.
    12. Oxana Babecká-Kucharèuková, 2009. "Transmission of Exchange Rate Shocks into Domestic Inflation: The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 137-152, June.
    13. Rafael Puyana Martínez-Villalba, 2011. "El efecto Balassa-Samuelson en Colombia," DOCUMENTOS CEDE 007959, UNIVERSIDAD DE LOS ANDES-CEDE.
    14. Julian Pérez Amaya, 2006. "Evaluación de Reglas de Tasa de Interés en un Modelo de Economía Pequeña y Abierta," Borradores de Economia 385, Banco de la Republica de Colombia.

    More about this item

    Keywords

    Pass-through effects; PPP; Imperfect competition; Floating regime; Low inflation environment; Fixed parameter model; Time-varying parameter model; Kalman filtering.;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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