Is low inflation really causing the decline in exchange rate pass-through?

Arbeitspapier

Recent literature has argued that exchange rate pass-through (ERPT) into domestic inflation has been declining in many countries following a dramatic change in inflation environment during the 1990s. Available empirical results face two central challenges: (i) the evidence on declining ERPT is mostly based on sample-splitting approaches and hence subject to a degree of arbitrariness; and (ii) the link between a lower ERPT and inflation environment is usually based on simple correlation analysis and hence silent about temporal causality. We address these issues by making use of a state-space model that allows ERPT to be time-varying and dependent on the inflation environment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: School of Economics Discussion Papers ; No. 10,02

Classification and Topics

• Classification: Wirtschaft ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems ; Monetary Policy ; Central Banks and Their Policies ; Foreign Exchange ; Open Economy Macroeconomics
• Subject: exchange rate pass-through ; inflation ; state-space models ; causality tests ; Geldpolitik ; Inflationsrate ; Exchange Rate Pass-Through ; Kausalanalyse

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nogueira Júnior, Reginaldo P. ; León-Ledesma, Miguel A.
• Event: Veröffentlichung
• (who): University of Kent, School of Economics
• (where): Canterbury
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/50636
• Last update: 10.03.2025, 11:43 AM CET