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Exchange rate pass-through to import prices in Europe: A panel cointegration approach

Author

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  • Antonia Arsova

    () (Leuphana University Lueneburg, Germany)

Abstract

This paper takes a panel cointegration approach to the estimation of short- and long-run exchange rate pass-through (ERPT) to import prices in the European countries. Although economic theory suggests a long-run relationship between import prices and exchange rate, in recent empirical studies its existence has either been overlooked, or it has proven dicult to establish. Resorting to novel tests for panel cointegration, we nd support for the equilibrium relationship hypothesis. Exchange rate pass-through elasticities, estimated by two di erent techniques for cointegrated panel regressions, give insight into the most recent development of the ERPT.

Suggested Citation

  • Antonia Arsova, 2019. "Exchange rate pass-through to import prices in Europe: A panel cointegration approach," Working Paper Series in Economics 384, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:384
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    References listed on IDEAS

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    More about this item

    Keywords

    exchange rate pass-through; import prices; panel cointegration; cross-sectional dependence; common factors;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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