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Exchange Rate Pass-through (ERPT) into Domestic Prices: Evidence from a Nonlinear Perspective

Siew-Voon Soon () and Ahmad Zubaidi Baharumshah ()

Economics Bulletin, 2017, vol. 37, issue 2, 1160-1167

Abstract: This paper uses a Markov-switching intercept autoregressive heteroskedasticity model to examine inflation dynamics and the exchange rate pass-through (ERPT) in Malaysia. Two different regimes are identified in the sample period (1990:Q1–2015:Q4). The results confirm a partial ERPT to domestic consumer prices, but the effect of exchange rates on domestic prices is asymmetry. The incomplete ERPT to the consumer price index is consistent with findings in earlier studies. We also confirm a positive but time-varying impact of terms of trade shocks on inflation.

Keywords: endogenous multiple breaks; exchange rate; inflation (search for similar items in EconPapers)
JEL-codes: E3 F3 (search for similar items in EconPapers)
Date: 2017-05-25
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