Moving out of the linear rut: A period-specific and regime-dependent exchange rate and oil price pass-through in the BRICS countries

Mehmet Balcilar, David Roubaud, Ojonugwa Usman and Mark Wohar ()

Energy Economics, 2021, vol. 98, issue C

Abstract: In this paper, we test for the period-specific and regime-dependent exchange rate and oil price pass-through (EROPPT) for the BRICS countries using monthly frequency data. To this end, we extend the Diebold-Yilmaz (DY) spillover index to nonlinear settings based on the vector smooth transition autoregressive (STVAR) model. The results suggest that changes in the exchange rate and oil price of different magnitudes have asymmetric effects between the lower and upper regimes of the period-specific and regime-dependent pass-through. The results further show that the pass-through effects are stronger during periods the BRICS economies have completely adjusted to a specific regime than periods in which the economies only partially adjusted. Furthermore, our findings show considerable evidence of a higher pass-through when nonlinearity is captured. Overall, these findings provide macroeconomic insights for the monetary policymakers.

Keywords: Exchange rate pass-through; Oil price; Inflation; Output growth; STVAR; BRICS countries (search for similar items in EconPapers)
JEL-codes: C58 E31 E50 E58 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001547

DOI: 10.1016/j.eneco.2021.105249

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