Exchange Rate Pass-Through Investigation for Turkish Economy

Kotil, Erdoğan

doi:10.3389/fams.2019.00066

Cited by 8 publications

(6 citation statements)

References 16 publications

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“…The estimated results revealed that ERPT in Egypt is incomplete and slow in three price indices of Import Price Index, Producer Price Index and Consumer Price Index. Kotil (2020) examined the ERPT for the Turkish economy and found that the effect of change in exchange rate is higher for the Producer Price Index than the Consumer Price Index.…”

Section: A Review Of Literature On Empirical and Recent Studiesmentioning

confidence: 99%

“…According to the Kotil (2020), Exchange Rate Pass-Through is complete when most of the exchange rate movement is transferred to domestic prices. If the degree of passthrough is high, then the then the relative changes of the prices of imports in the domestic currency is high casing pay higher price for imports goods due to the higher fluctuations in the Nominal Exchange Rate (NER).…”

Section: Introductionmentioning

confidence: 99%

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An Analysis of Exchange Rate Pass-Through and Impact on Domestic Inflation in Sri Lanka

Jayasekara¹

2022

IJEFI

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Continuous depreciation of the Sri Lanka Rupee and huge inflation caused by skyrocketing of fuel and food prices Sri Lanka is now experiencing an external imbalance as well as instability in the domestic economy. Policy makers are confronting enormous challenges due to these external and domestic shocks that would hinder to effective policy implementation. Therefore, an analysis of external shocks and the exchange rate pass-through has now become timely area to understand the size and the degree and its real impact on the economy. Therefore, this paper examines the effectiveness of exchange rate pass-through to import price, producer price and consumer price and impact on the inflation in Sri Lanka. For this purpose, the analysis is based on a Vector Auto Regression (VAR) approach for the period of 2010Q1 -2021Q4.The findings of this study confirms that the pass-through effect of external shocks on exchange rate and exchange rate on import price, producer price and consumer price are incomplete. The impact of change in the exchange rate on the import price shows that the one percent depreciation of Sri Lanka rupee results man increase in the import price index by 0.31 percent in the first quarter and 0.42 percent in the second quarter. The pass-through effects of exchange rate on consumer price is also incomplete across all the periods. The consumer price increases by 0.22 percent when the domestic currency depreciates by one percent. However, in the fourth quarter, it shows a negative response confirming that consumer price decrease by 0.36 percent when the nominal effective exchange rate increases by one percent. The estimated results suggest that the pass-through effects of international oil price shocks and exchange rate shocks appear to be quite ambiguous and provides puzzling results for some periods.

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Section: A Review Of Literature On Empirical and Recent Studiesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

An Analysis of Exchange Rate Pass-Through and Impact on Domestic Inflation in Sri Lanka

Jayasekara¹

2022

IJEFI

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“…Hence, there had not been a general consensus on the interaction effect between exchange rate and inflation. Kotil (2020) noted that there had been an increased in empirical studies on ERPT in both developed and emerging economies, and the literature had focused on two approaches. According to the author, the first approach is on factors affecting the transition effect, while the second approach focuses on pass-through duration and its magnitude.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Further, recent empirical studies on the exchange rate -inflation nexus were evaluated and yet no general consensus on the interaction effect between exchange rate and inflation was evident. Among the studies include, Kotil (2020) who examined ERPT to domestic prices in Turkey covering the period of 2005 to 2019. Utilizing the VAR model procedure, the results indicate a greater response to consumer prices than the producer prices.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, there had been inconsistencies in their findings. For instance, some studies showed that exchange rate explains inflationary pressure (see Kotil, 2020;Imimole, Enoma, 2011;Odusola, Akinlo, 2001;Montiel, 1989). Other studies find a partial exchange rate pass-through to consumer prices (see Kurtović, 2019;Adekunle, Ajao, 2018;Helmy, Fayed, Hussien, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Investigating Exchange Rate Pass-through to Consumer Prices in Nigeria

Ugwu

Amassoma

Ehinomen

2021

Folia Oeconomica Stetinensia

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Research background: There have been several studies on the degree of exchange rate pass-through (ERPT) to consumer prices, as well as macroeconomic environment with yet no clear direction. Purpose: This research work investigates exchange rate pass-through effects into consumer prices in Nigeria from 1960 to 2018. Research methodology: The methodology employed by the study for estimation is the Johansen cointegration and Vector Error Correction Model (VECM) procedures. Results: The empirical results indicate an incomplete pass-through of exchange rate into consumer prices in Nigeria. The pass-through is found to be 1.6 for the model under consideration. The impulse response function results indicate that the response of the consumer prices to the exchange rate shock decreases immediately to a negative shock in the short run, and continues along the horizon to a positive shock in the long run. Also, the response of consumer prices to interest rate shock decreases immediately and continues to fluctuate to a negative shock in both the short run long run horizon. Novelty: The results support the view that exchange rate policy should be complimented with coordinated macroeconomic policy approaches in order to control inflationary level in the economy. The study therefore recommends that the Federal Government should adopt a tightening of the monetary policy as it will help reduce the impact of exchange rate depreciation on consumer prices.

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The effect of output level, exchange rate and interest rate on inflation in BRIC-T countries

Akbaş,

Dönmez,

Can

2024

REPS

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PurposeIn this study, it is analyzed the validity of the exchange rate pass-through (ERPT) effect and the effect of interest rate and output level on the inflation rate (IR) in Brazil, Russia, India, China and Turkey (BRIC-T) between the years 1995Q1 and 2022Q4.Design/methodology/approachThe methods such as the panel unit root test developed by Westerlund (2012), the LM bootstrap panel cointegration test developed by Westerlund and Edgerton (2007), the common correlated effects (CCE) estimator developed by Pesaran (2006) and the augmented mean group (AMG) estimator developed by Eberhardt and Bond (2009) that take into account the cross-section dependency are applied for analysis.FindingsAs a result of the findings, it is determined that the ERPT effect is valid in Turkey, Brazil, Russia, India and China and the cost channel is valid only in China. Finally, it is found out that output level positively affects inflation in Turkey, Brazil, Russia, India and China.Practical implicationsAll these results indicate that the economies of Turkey, Russia, Brazil and India have a fragile structure, especially in terms of inflation. Therefore, the central bank of these countries should maintain exchange-rate stability to implement the inflation-targeting strategy successfully. In this context, central bank independence should be increased in these countries in achieving this objective. Also the results indicate that it is still early to consider whether BRIC-T countries and accordingly the Belt and Road Initiative will be an alternative against the domination of the USA and European Union (EU) on international trade system or it will substitute them.Originality/valueIn this study, it is tested that the impact of interest-rate (NIR), exchange-rate (FER) and output level (IPI) on general level of prices. Besides, it is analyzed that whether production level affects the IR. Also, the study investigates the economic issues such as ERPT effect and cost channel. The study analyzes whether China's Belt and Road Initiative is successful or not. In this study, we used the panel data methods that allow for structural breaks and cross-section dependency. For these reasons, this study differs from other studies in the literature both in terms of scope and methods used.

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Exchange Rate Pass-Through Investigation for Turkish Economy

Cited by 8 publications

References 16 publications

An Analysis of Exchange Rate Pass-Through and Impact on Domestic Inflation in Sri Lanka

An Analysis of Exchange Rate Pass-Through and Impact on Domestic Inflation in Sri Lanka

Investigating Exchange Rate Pass-through to Consumer Prices in Nigeria

The effect of output level, exchange rate and interest rate on inflation in BRIC-T countries

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