Non-linearities in exchange rate pass-through: Evidence from smooth transition models

Nidhaleddine Ben Cheikh ()

Economics Bulletin, 2012, vol. 32, issue 3, 2530-2545

Abstract: This paper examines the presence of non-linear mechanism in the exchange rate pass-through (ERPT) to CPI inflation for 12 euro area (EA) countries. Using smooth transition regression (STR) model, we explore the existence of non-linearities with respect to the inflation environment. We find strong evidence that pass-through respond non-linearly to inflation level for 8 out of 12 EA countries, that is, the transmission of exchange rate is higher when inflation rate surpass some threshold. Our results provide a broad support to the hypothesis suggested by Taylor (2000) that ERPT is decreasing in a lower and more stable inflation environment.

Keywords: Exchange Rate Pass-Through; Inflation; Smooth Transition Regression Models; Euro Area (search for similar items in EconPapers)
JEL-codes: E3 F4 (search for similar items in EconPapers)
Date: 2012-09-16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I3-P243.pdf (application/pdf)

Related works:
Working Paper: Non-linearities in exchange rate pass-through: Evidence from smooth transition models (2012)
Working Paper: Non-linearities in exchange rate pass-through: Evidence from smooth transition models (2012)
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:ebl:ecbull:eb-12-00499

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().