Asymmetric exchange rate pass-through in an emerging market economy: The case of Mexico

Baharumshah, Ahmad Zubaidi; Sirag, Abdalla; Soon, Siew-Voon

doi:10.1016/j.ribaf.2017.04.034

Cited by 43 publications

(21 citation statements)

References 47 publications

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“…Similarly, a study by Jooste and Jhaveri (2014) suggests that a decline in the pass‐through in South Africa is attributed to a low and stable inflation environment. These findings in South Africa are congenial with Baharumshah Sirag and Soon (2017), Baharumshah, Soon, et al (2017), Ben Cheikh and Lonhichi (2016), Jiménez‐Rodríguez and Morales‐Zumaquero (2016), Junttila and Korhonen (2012), Kilic (2016), Pollard and Coughlin (2004), Shintani, Terada‐Hagiwara, and Tomoyoshi (2013) and Soon et al (2018). In China, Apergis (2015) finds asymmetric evidence of the ERPT to poverty with the period of depreciation of the Chinese currency having a stronger pass‐through impact than when Chinese currency appreciates.…”

Section: Theoretical Framework and Literature Reviewmentioning

confidence: 65%

Testing the asymmetric effects of exchange rate pass‐through in BRICS countries: Does the state of the economy matter?

2020

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One of the central issues within the framework of the new open-economy macroeconomic models is the pass-through of exchange rate to prices. This issue is largely triggered by persistent high volatility in terms of exchange rates between countries following the collapse of the Bretton Woods system of adjustable peg in the 1970s. Essentially, the issue has demonstrated a vastly increased risk to achieving the monetary policy goal of low and stable inflation levels especially during periods of greater openness, characterised by a significant change in exchange rate and trade policies (see Balcilar,

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Section: Theoretical Framework and Literature Reviewmentioning

confidence: 65%

Testing the asymmetric effects of exchange rate pass‐through in BRICS countries: Does the state of the economy matter?

2020

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“…Investigation of the relationship between exchange rates and prices has moved forward by allowing for asymmetric and nonlinear ERPT to price levels in developed and emerging countries (Delatte and Lòpez-Villavicencio 2012;Yanamandra 2015;Brun-Aguerre et al 2016;Baharumshah et al 2017;Kassi et al 2018, among others). Brun-Aguerre et al (2016) investigated the ERPT to import prices for an unbalanced panel data of 14 emerging markets and 19 developed markets from 1980Q1 to 2010Q4.…”

Section: Empirical Reviewmentioning

confidence: 99%

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

et al. 2019

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This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 sub-Saharan African (SSA) countries from 1990Q1 to 2017Q4. We estimate the exchange rate pass-through (ERPT) to consumer prices for each country by using the nonlinear autoregressive distributed lag (NARDL) framework and dynamic panel techniques robust to cross-sectional dependence. First, our findings suggest an asymmetrical ERPT in the SSA region during the short term, whereas there are mixed results across subregions in the long term. Second, the results of the panel analysis suggest incomplete and significant ERPT to consumer prices in the entire SSA region, which is higher during depreciation of the local currency than after appreciation in the short-term, especially in the CFA Franc zone. Third, we find nonlinear ERPT with respect to the size of the exchange rate. Finally, we find that pass-through is higher in countries with fixed exchange rate regimes (CFA franc zone) in a low inflationary environment than in countries with floating exchange rate regimes and high inflation levels. Pass-through is greater during large exchange rate changes than after small changes. Therefore, the policy implication is to consider these asymmetries and nonlinearities to improve monetary policy’s credibility, enhance trade liberalization, and promote competitive market structures in the SSA region.

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“…Most of these studies ignored the likely asymmetrical ERPT to prices (inflation) underlined in the theoretical models of pricing to market where foreign exporters adjust the prices in the importing country in response to the size and direction of exchange rate movements. Accordingly, recent studies consider nonlinearities and asymmetry in their investigation of the relationship between exchange rate and domestic prices in the developed and emerging economies (Brun-Aguerre et al 2012; Choudhri and Hakura 2015; Yanamandra 2015; Brun-Aguerre et al 2016; Baharumshah et al 2017, among others). In fact, these studies revealed an asymmetrical and non-linear ERPT to import prices as well as a complete and high pass-through during exchange rate depreciations than appreciations in the long-term.…”

Section: Introductionmentioning

confidence: 99%

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

Kassi¹,

Sun²,

Ding³

et al. 2018

Preprint

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This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 Sub-Saharan African (SSA) countries from 1990q1 to 2017q4. The exchange rate pass-through (ERPT) to consumer prices is estimated for each country by using the nonlinear autoregressive distributed lags (NARDL) framework and dynamic panel estimators robust to cross-sectionally correlated errors. Firstly, our findings suggest an asymmetrical ERPT in the SSA region during the short-term, whereas there are mixed results across sub-regions in the long-term. Next, we find incomplete and significant ERPT to consumer prices in the entire SSA region which is higher during the depreciation of the local currency than after appreciations. Third, we find nonlinear ERPT with respect to the size of the exchange rate. The pass-through is higher during large exchange rate changes than after small changes.  Finally, we find that the pass-through is greater in the countries with fixed exchange rate regime (CFA franc zone) having low inflationary environment than in the other SSA countries with flexible exchange rate regime and high inflation levels. As a result, policymakers should take into account these asymmetries and non-linearities to improve the credibility of monetary policy, strengthen trade liberalization and establish competitive market structures in the Sub-Saharan region.

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Asymmetric exchange rate pass-through in an emerging market economy: The case of Mexico

Cited by 43 publications

References 47 publications

Testing the asymmetric effects of exchange rate pass‐through in BRICS countries: Does the state of the economy matter?

Testing the asymmetric effects of exchange rate pass‐through in BRICS countries: Does the state of the economy matter?

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

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