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Asymmetric exchange rate pass-through: Evidence from major countries

Author

Listed:
  • Anne-Laure Delatte

    (Rouen Business School)

  • Antonia Lopez Villavicencio

    (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this paper is to investigate the asymmetric eect of exchange rate variations on prices over the short-and long-run. To this end, we estimate a mark-up model for prices using a novel and simple asymmetric cointegrating model, with positive and negative partial sum decomposition of the nominal exchange rates. Our results show that prices react dierently to appreciations and depreciations over the long-run, an eect that was previously ignored in the literature. In particular, we provide evidence that depreciations are passed through prices more than appreciations, a result that might suggest weak competition structures. This result has important implications for the proper conduct of monetary policy.

Suggested Citation

  • Anne-Laure Delatte & Antonia Lopez Villavicencio, 2011. "Asymmetric exchange rate pass-through: Evidence from major countries," Post-Print hal-05454837, HAL.
    • Handle: RePEc:hal:journl:hal-05454837
    DOI: 10.1016/j.jmacro.2012.03.003
    Note: View the original document on HAL open archive server: https://hal.science/hal-05454837v1
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    References listed on IDEAS

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