Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?
By Dalia S. Hakura, Ehsan U. Choudhri. Social Science Research Network, 2001
674 citations recorded by the source corpus.
The paper tests a hypothesis suggested by Taylor (2000) that a low inflationary environment leads to a low exchange rate pass-through to domestic prices. To test this hypothesis, the paper derives a pass-through relation based on new open economy macroeconomic models. A large database that includes 1979-2000 data for 71 countries is used to estimate this relation. There is strong evidence of a positive and significant association between the pass-through and the average inflation rate across countries and periods. The inflation rate, moreover, dominates other macroeconomic variables in explaining cross-regime differences in the pass-through.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/7846b79f36ba0c6ef49630ee241c8adbe057f97e
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Citations in the corpus
- Exchange Rate Pass-Through in the Global Economy: The Role of Emerging Market Economies (2014, neutral): “Readers interested in these specific events may refer to Ito and Sato (2008), Burstein, Eichenbaum, and Rebelo (2005 and 2007) and to Cook and Devereux (2006)—see also Bussière (2013) for a more general discussion of nonlinearities in the degree of pass-through.”
- Another Pass-Through Bites the Dust?: Oil Prices and Inflation (2007, background): “Recent work on exchange rate pass-through by Frankel et al. (2005) uses narrowly defined commodities and finds, among other things, confirmation that the inflation environment is important in explaining pass-through. Thus the exchange rate pass-through literature reveals that microeconomic as well a”
- Exchange Rate Pass-Through in Emerging Markets (2007, positive): “Similarly to Choudhri and Hakura (2006) and McCarthy (2000) , we find little evidence of a positive relationship between ERPT to consumer prices and openness.”
- Non-Linear Exchange Rate Pass-Through in Emerging Markets (2016, methodology): “…is around 22 percent after 12 months after the initial shock and it reaches 25 percent after two years.3 These results are in line with the literature: Choudhri and Hakura (2006) report an ERPT coefficient of 14 percent after 1 quarter, 24 percent after 4 quarters and 27 percent after 20 quarters.”
- Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical Investigation (2004, positive): “Choudhri and Hakura (2001) emphasize a channel similar to the one in Taylor (2000) in the context of a more elaborate DGE model with imperfect competition and staggered contracts.”
- Exchange Rate Pass-Through: Evidence Based on Vector Autoregression with Sign Restrictions (2011, neutral): “(2005), Choudhri and Hakura (2006), and McCarthy (2007), among others.”
- Exchange Rates and Monetary Policy in Emerging Market Economies (2004, neutral): “[20] Chaudry, Eshan and Hakura (2001) “Exchange Rate Pass-through to Domestic Prices: Does the Inflationary Environment Matter?” IMF Working Paper 01/194.”
- Living with Flexible Exchange Rates: Issues and Recent Experience in Inflation Targeting Emerging Market Economies (2003, neutral): “6 0 0.1 0.2 0.3 0.4 0.5 0 20 40 60 80 100 120 ● ● ● ● ● ● ● ● ● ● ● ● BR CL MX ID KR PH TH CZ HU PL IL ZA ■ ■ ■ ■ ■ ■ ■ AU CA NZ SE CH GBUS 0 0.1 0.2 0.3 0.4 0.5 0 5 10 15 20 25 30 ● ● ● ● ● ● ● ● ● ● ● ● BR CL MX ID KR PH TH CZ HU PL IL ZA ■■ ■ ■ ■ ■ ■ AU CA NZ SE CH GB US Openness, income and pass”