Explaining the Exchange Rate Pass-Through in Different Prices

By Ehsan U. Choudhri, Hamid Faruqee, Dalia S. Hakura. Social Science Research Network, 2002

180 citations recorded by the source corpus.

This paper examines the performance of different new open economy macroeconomic models in explaining the exchange rate pass-through in a wide range of prices. Quantitative versions of different models are used to derive the dynamic response of various prices to an exchange rate shock. Predicted responses are compared with the evidence based on VAR models to examine how well different models fit the data. The results show that the best-fitting model incorporates a number of features highlighted by different strands of the literature: sticky prices, sticky wages, distribution costs, and a combination of local and producer currency pricing.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/572d32f7d410cd2e0f2721da4082822cf6c281fe

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Citations in the corpus

A new look at pass-through (2008, result): “Choudhri et al (2002) examine passthrough with a short run restrictions VAR and compare the results to a variety of new open economy models.”
Exchange Rate Pass-Through in Emerging Markets (2007, unknown): “In the first place, we adopt the following alternative ordering scheme (Alternative 1 model), t oil , t i , t y , t e , t pimp , t cpi , where in particular the interest rate is moved before the exchange rate, as proposed for example by Choudhri et al. (2002).”
Exchange Rate Pass-Through: Evidence Based on Vector Autoregression with Sign Restrictions (2011, unknown): “The “overshooting” pattern of PT ratios is also present in the IMP PT estimates in Choudhri et al. (2005) .”