An Empirical Assessment of the Exchange Rate Pass-through in Mozambique

Simione, Felix; Manguinhane, Edson

doi:10.5089/9781513573694.001

Cited by 8 publications

(1 citation statement)

References 20 publications

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“…Using Autoregressive Distributive Lag (ARDL), Aisen et al (2021) estimated the ERPT in Mozambique for a sample covering 2001 to 2019. According to their findings, the ERPT is asymmetric, large and quick, with 50% of exchange rate changes passing through to prices in less than six months.…”

Section: Empirical Reviewmentioning

confidence: 99%

Exchange rate pass-through to inflation in South Africa: is there non-linearity?

Gereziher

Nuru

2023

AJEMS

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PurposeThis paper aims to examine the asymmetric effects of exchange rate shocks on inflation for a small open economy, namely South Africa, over the period 1970Q1–2020Q1.Design/methodology/approachA threshold vector autoregressive model that allows parameters to switch according to whether a threshold variable crosses an estimated threshold is employed to address the objective of this paper. The threshold value is determined endogenously using the Hansen (1996) test. Generalized impulse responses introduced by Koop et al. (1996) are used to study the effects of exchange rate shocks on inflation depending on their size, sign and timing to the inflation cycle. The authors also employed a Cholesky decomposition identification scheme to identify exchange rate shocks in the non-linear model.FindingsThe results show that there is a non-linearity effect of the exchange rate shock on inflation. In particular, the effects of 1 or 2 standard deviations of positive (appreciation) or negative (depreciation) exchange rate shock on inflation are small in the long run but a bit larger in the high inflation regime than the low inflation regime.Originality/valueThis paper contributes to the literature on the non-linear effects of exchange rate pass-through (ERPT) to inflation for Sub-Saharan African economies in general and the South African economy in particular by incorporating the size and timing of the exchange rate shocks to the inflation cycle.

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Section: Empirical Reviewmentioning

confidence: 99%