Assessing estimates of the exchange rate pass-through

Ida Wolden Bache
Additional contact information
Ida Wolden Bache: Norges Bank (Central Bank of Norway)

No 2007/12, Working Paper from Norges Bank

Abstract: This paper uses Monte Carlo techniques to address the question: are structural VAR estimates of exchange rate pass-through a useful tool to evaluate macroeconomic models of open economies? The data generating process is a small open economy DSGE model with incomplete pass-through. The results suggest that (i) the pass-through estimates obtained from a first-differenced VAR exhibit a systematic downward bias; (ii) by contrast, estimates derived from a low order vector equilibrium correction model are fairly accurate; but (iii) standard cointegration tests have low power to detect the cointegration relations implied by the DSGE model.

Keywords: Exchange rate pass-through; structural VAR; DSGE models; cointegration (search for similar items in EconPapers)
JEL-codes: C32 C52 F41 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2008-01-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-ifn and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.norges-bank.no/en/news-events/news-pub ... pers/2007/WP-200712/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2007_12

Access Statistics for this paper

More papers in Working Paper from Norges Bank Contact information at EDIRC.
Bibliographic data for series maintained by ().