Exchange Rate Pass-Through in the Euro Area: The Role of Asymmetric Pricing Behavior

By Hamid Faruqee. Social Science Research Network, 2004

142 citations recorded by the source corpus.

Exchange rate pass-through in a set of euro area prices along the pricing chain is examined. Using a vector autoregression (VAR) approach, the empirics analyze the joint time-series behavior of the euro exchange rate and a system of euro-area prices in response to an exchange rate shock. The impulse-response functions from the VAR estimates are used to identifyin a `new open economy macroeconomics model`those key behavioral parameters that best replicate the pattern of exchange rate pass-through in the euro area. Area-wide prices are found to display incomplete pass-through, consistent with euro currency-pricing and pricing-to-market behavior. The results are compared to those for the other major industrial economies, and suggest that, as with the United States, "expenditure-switching" effects on the current account still operate but are generally small.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/d02b3d0d89ee39d076508b13e43a907b4c99daa1

Citations in the corpus

• Exchange Rate Pass-Through: Evidence Based on Vector Autoregression with Sign Restrictions (2011, unknown): “Differencing throws information away while produces no gains, which may cause the results, such as impulse response functions, to lack statistical significance (See Fuller (1976) and RATS User’s Guide (2004)).”