Time-varying exchange rate pass-through: experiences of some industrial countries
This paper estimates exchange rate pass-through of six major industrial countries using a time-varying parameter with stochastic volatility model. Exchange rate pass-through is divided into impacts of exchange rate fluctuations to import prices (first-stage pass-through) and those of import price movements to consumer prices (second-stage pass-through). The paper finds that both stages of pass-through have declined over time for all the sample countries. The decline in second-stage pass-through is associated with the emergence of the low and stable inflation environment as well as a rise in import penetration, while the relationship to the inflation environment is weak for first-stage pass-through.
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- Frankel, Jeffrey & Parsley, David & Wei, Shang-Jin, 2005.
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5395, C.E.P.R. Discussion Papers.
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"Stochastic Volatility with Leverage: Fast Likelihood Inference,"
CIRJE-F-297, CIRJE, Faculty of Economics, University of Tokyo.
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"Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies,"
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Eastern Economic Association, vol. 33(4), pages 511-537, Fall.
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