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Long Run Exchange Rate Pass-Through: Evidence from New Panel Data Techniques

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  • Nidhaleddine Ben Cheikh

    (University of Rennes 1 - CREM (UMR 6211 CNRS))

Abstract

This paper examines the exchange rate pass-through (ERPT) into import prices using recent panel data techniques. For a sample of 27 OECD countries, panel cointegration tests provide an evidence for the existence of long-run equilibrium relationship in pass-through equation. Following Pedroni (2001), we employ both FM-OLS and DOLS estimators and show that long-run ERPT elasticity does not exceed 0.70%. Individual estimates of ERPT are heterogeneous across 27 OECD countries, ranging from 0.23% in France to 0.98% in Poland. When we look for the macroeconomic determinants of this long-run heterogeneity, we implement a panel threshold methodology as introduced by Hansen (2000). Our results indicate a regime-dependence of ERPT, that is, countries with higher inflation regime and more exchange rate volatility would experience a higher degree of pass-through.

Suggested Citation

  • Nidhaleddine Ben Cheikh, 2012. "Long Run Exchange Rate Pass-Through: Evidence from New Panel Data Techniques," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201225, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  • Handle: RePEc:tut:cremwp:201225
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    References listed on IDEAS

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    Cited by:

    1. Nidhaleddine Ben Cheikh & Christophe Rault, 2016. "The Pass‐through of Exchange Rate in the Context of the European Sovereign Debt Crisis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(2), pages 154-166, April.
    2. Ken Miyajima, 2020. "Exchange rate volatility and pass‐through to inflation in South Africa," African Development Review, African Development Bank, vol. 32(3), pages 404-418, September.
    3. Nidhaleddine Ben Cheikh & Christophe Rault, 2016. "The Role of the Business Cycle in Exchange Rate Pass-Through: The Case of Finland," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(1), pages 15-27, June.
    4. Fatma Marrakchi Charfi & Mohamed Kadria, 2016. "Incomplete Exchange Rate Pass-Through Transmission To Prices: An Svar Model For Tunisia," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 11(04), pages 1-23, December.
    5. Safet Kurtović & Blerim Halili & Nehat Maxhuni, 2019. "Exchange rate pass-through into import prices: evidence from Central and Southeast European countries," Indian Economic Review, Springer, vol. 54(1), pages 51-80, June.
    6. Joscha Beckmann & Ansgar Belke & Florian Verheyen, 2014. "Exchange rate pass-through into German import prices - a disaggregated perspective," Applied Economics, Taylor & Francis Journals, vol. 46(34), pages 4164-4177, December.

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    More about this item

    Keywords

    Exchange Rate Pass-Through; Import Prices; Panel Cointegration; Panel Threshold;
    All these keywords.

    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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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