Nonlinear exchange rate pass-through in Mexico

Arbeitspapier

This paper aims to investigate if the exchange rate pass-through (ERPT) to consumer prices follows a nonlinear behavior in Mexico. To look for nonlinearities, we employ a Threshold VAR approach (TVAR). The threshold allows us to differentiate regimes of "high" or "low" depreciation and the effect of exchange rate movements onto prices in each of these regimes. Our results suggest the existence of nonlinearities in Mexico only for the merchandise inflation measure, including the food and non-food subindices, with an estimated threshold that varies from an annual depreciation rate of 7.20 to 7.30 percent. Even though we find that these ERPT coefficients differ between regimes from a statistical point of view, the effect over headline inflation is small. Our results are consistent with the consolidation of a low ERPT in Mexico.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2019-16

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Price Level; Inflation; Deflation ; Foreign Exchange
• Subject: Exchange-Rate Pass-through ; Threshold VAR ; Inflation ; Foreign Exchange

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jaramillo Rodríguez, Jorge ; Pech Moreno, Luis Alberto ; Ramírez, Claudia ; Sanchez-Amador, David
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/240684
• Last update: 10.03.2025, 11:43 AM CET