IDEAS home Printed from
   My bibliography  Save this paper

Global value chains and exchange rate pass-through: the role of non-linearities


  • Jan Hagemejer

    () (University of Warsaw)

  • Aleksandra Hałka

    () (Narodowy Bank Polski)

  • Jacek Kotłowski

    (SGH Warsaw School of Economics)


We examine the relationship between development of global value chains and changes in the exchange rate pass-through to producer prices. In contrast to the existing research we assume that the decline in ERPT resulting from the enhanced participation in GVC may be nonlinear with respect to the country’s position in the global value chain, reflecting divergent firms’ market power at various stages of vertical specialization process. We investigate a panel of 43 advanced and emerging economies using a panel smooth transition regression (PSTR) model and WIOD data and find that growing backward GVC participation of the suppliers of imported intermediate input results in the reduction of the ERPT to producer prices. We also provide evidence that this effect is non-linear. The exchange rate pass-through for countries, whose suppliers are strongly involved in the production along the global value chains is significantly (four times) smaller than for economies with suppliers not participating in GVC. We document that the decline in the aggregate ERPT in recent years has been mainly due to changes in the exchange rate pass-through for the EU members states due to increased backward GVC participation of their major trading partners. For other countries, the ERPT remained roughly the same throughout the analyzed period.

Suggested Citation

  • Jan Hagemejer & Aleksandra Hałka & Jacek Kotłowski, 2020. "Global value chains and exchange rate pass-through: the role of non-linearities," NBP Working Papers 324, Narodowy Bank Polski, Economic Research Department.
  • Handle: RePEc:nbp:nbpmis:324

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Global value chains; exchange rate pass-through; inflation; PSTR model;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbp:nbpmis:324. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zbigniew Polański). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.