Pass-Through of External Shocks to Euro Area Inflation

Exchange Rate Pass-Through in the Euro Area: The Role of Asymmetric Pricing Behavior

“…The time pattern is similar, though, with most of the price adjustment transpiring by 5 quarters. Based on a quarterly VAR,Hahn (2003) reports similar findings on the degree using the euro area non-oil import deflator.…”

“…That analysis also includes the interest rate in the VAR in order to further distinguish between the effects of interest rate and exchange rate shocks on prices. McCarthy (2001) and Hahn (2003) also uses a Cholesky decomposition to examine pass-through based on a somewhat different model. 15 The symmetric positive definite matrix Ω can be decomposed into unique lower triangular and diagonal matrices such that Ω = CDC'.…”

“…SeeJaeger (2002).3 SeeObstfeld (2002) andEngel (2002) for a recent review of these issues.4 SeeDevereux and Engel (2002) andKrugman (1989).5 SeeGoldberg and Knetter (1997) for a survey. SeeKieler (2001), Huffner andSchroder (2001),Anderton (2003), andHahn (2003) for euro area estimates.6 SeeBetts and Devereux (1996, 2000) andDevereux and Engel (2002).…”

Revista PUCE Núm 96

“…Para ello, se introducen restricciones que permitan identificar dichos choques. Según McCarthy (2000), Hahn (2003) y Stulz (2007), se utilizan restricciones de corto plazo sobre los efectos contemporáneos de las innovaciones estructurales sobre las variables del modelo. Los residuales en forma reducida del VAR u son ortogonalizados mediante una descomposición de Cholesky para producir las innovaciones estructurales e; es decir: Donde C es la matriz triangular inferior de Cholesky, con valores de 1 en su diagonal principal.…”

Algeria: Selected Issues Paper: Selected Issues Paper

“…We also assume that output and the price level respond to current innovations in domestic policy variables (monetary policy) as well as to foreign variables (nominal effective exchange rate and import prices). Following the literature, the study places the domestic prices at the bottom of the ordering, the assumption that the price variable is contemporaneously impacted by all other variables while the price is not affected contemporaneously by other shocks (see Hahn, 2003). Besides, the Granger-Causality test indicates that M2 Granger causes the nominal effective exchange rate and not the other way around, so M2 will precede NEER in the ordering.…”