Nonlinearities in the Exchange Rate Pass-Through: The Role of Inflation Expectations

Arbeitspapier

This paper investigates nonlinearities in the exchange rate pass-through (ERPT) to consumer and import prices by estimating a smooth transition regression model with different inflation expectations regimes for five inflation targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeters (the US, the Euro-Area and Switzerland) respectively over the period January 1993-August 2021. Both market and survey measures of inflation expectations are used as the transition variable, and the nonlinear model is also assessed against a benchmark linear model. The pass-through to both consumer and import prices is found to be stronger in the nonlinear model and in some cases is close to being complete. Also, it is stronger for import prices than for consumer prices. Both seem to be more responsive to exchange rate changes when market expectations of both consumers and producers are considered instead of expectations from consumer surveys only. Finally, inflation expectations appear to affect the ERPT more in inflation targeting countries.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 9544

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Foreign Exchange ; Open Economy Macroeconomics
• Thema: exchange rate pass-through ; smooth transition regression ; nonlinearities ; inflation expectations

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Anderl, Christina ; Caporale, Guglielmo Maria
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2022

Weitere Informationen

• Handle: http://hdl.handle.net/10419/252061
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ