Exchange Rate Pass-Through and Inflation: A Nonlinear Time Series Analysis
This paper investigates the relationship between the exchange rate pass-through (ERPT) and inflation by estimating a nonlinear time series model. Using a simple theoretical model of ERPT determination, we show that the dynamics of ERPT can be well-approximated by a class of smooth transition autoregressive (STAR) models with inflation as a transition variable. We employ several U-shaped transition functions in the estimation of the time-varying ERPT to U.S. domestic prices. The estimation result suggests that declines in the ERPT during the 1980s and 1990s are associated with lowered inflation.
|Date of creation:||Nov 2009|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.vanderbilt.edu/econ/wparchive/index.html|
When requesting a correction, please mention this item's handle: RePEc:van:wpaper:0920. 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: (John P. Conley)
If references are entirely missing, you can add them using this form.