TY - JOUR
T1 - Exchange rate pass-through and inflation
T2 - A nonlinear time series analysis
AU - Shintani, Mototsugu
AU - Terada-Hagiwara, Akiko
AU - Yabu, Tomoyoshi
N1 - Funding Information:
The authors gratefully acknowledge an anonymous referee, the Editor, Mick Devereux, Ippei Fujiwara, Naohisa Hirakata, Kevin Huang, Nobu Kiyotaki, Takushi Kurozumi, Keisuke Otsu, Shigenori Shiratsuka and seminar and conference participants at the Georgia Institute of Technology, Osaka University, the University of Texas at Arlington and the 2009 Far East and South Asia Meeting of the Econometric Society for their helpful comments and discussions. Shintani gratefully acknowledges financial support by the National Science Foundation Grant SES-1030164. The views expressed in the paper are those of the authors and are not reflective of those of the Asian Development Bank.
PY - 2013
Y1 - 2013
N2 - This paper investigates the relationship between the exchange rate pass-through (ERPT) and inflation by estimating a nonlinear time series model. Based on a simple theoretical model of ERPT determination, we show that the dynamics of ERPT can be well approximated by a class of smooth transition autoregressive (STAR) models using the past inflation rate as a transition variable. We employ several U-shaped transition functions in the estimation of the time-varying ERPT to US domestic prices. The estimation result suggests that declines in the ERPT during the 1980s and 1990s are associated with lowered inflation.
AB - This paper investigates the relationship between the exchange rate pass-through (ERPT) and inflation by estimating a nonlinear time series model. Based on a simple theoretical model of ERPT determination, we show that the dynamics of ERPT can be well approximated by a class of smooth transition autoregressive (STAR) models using the past inflation rate as a transition variable. We employ several U-shaped transition functions in the estimation of the time-varying ERPT to US domestic prices. The estimation result suggests that declines in the ERPT during the 1980s and 1990s are associated with lowered inflation.
KW - Import prices
KW - Inflation indexation
KW - Pricing-to-market
KW - Smooth transition autoregressive models
KW - Sticky prices
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U2 - 10.1016/j.jimonfin.2012.05.024
DO - 10.1016/j.jimonfin.2012.05.024
M3 - Article
AN - SCOPUS:84873310834
SN - 0261-5606
VL - 32
SP - 512
EP - 527
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
IS - 1
ER -