Exchange Rate Pass-Through in Emerging Markets
By M. Zorzi, E. Hahn, M. Sánchez. Social Science Research Network, 2007
312 citations recorded by the source corpus.
This paper examines the degree of Exchange Rate Pass-Through (ERPT) to prices in 12 emerging markets in Asia, Latin America and Central and Eastern Europe. The results, based on three alternative vector autoregressive models, partly overturn the conventional wisdom that ERPT into both import and consumer prices is always higher in ‘emerging’ than in ‘developed’ countries. For emerging markets with only one digit inflation (most notably the Asian countries), pass-through to import and consumer prices is found to be low and not very dissimilar from the levels of developed economies. The paper also finds robust evidence for a positive relationship between the degree of the ERPT and inflation, in line with Taylor’s hypothesis once two outlier countries—Argentina and Turkey— are excluded from the analysis. Finally, the presence of a positive link between import openness and ERPT, while plausible theoretically, finds only weak empirical support.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/4aabd6ed72eb4e15c300632d58db3120baca2ca0
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Citations in the corpus
- Non-Linear Exchange Rate Pass-Through in Emerging Markets (2016, methodology): “recursive identification by Choleski decomposition (Ca’Zorzi et al. 2007). However, as pointed out by Edwards (2006), this type of identification scheme makes assumptions on the timing of the effects of the exchange rate on prices that are often too restrictive. As pointed out by Meese and Rogoff (1”