 Time varying pass-through: Will the yen depreciation help Japan hit the inflation target?Journal of the Japanese and International Economies, 2015, vol. 37, issue C, 43-58 Abstract: This paper argues that the exchange rate could be a powerful transmission channel of the effects of ongoing “unconventional” monetary policies in Japan. It is shown that exchange rate pass-through to domestic prices, once considered near-extinct, has come back strong in recent years. This is especially true for those items that households purchase frequently. Evidence based on VARs as well as TVP-VARs indicates that a 25% depreciation of the yen would produce a 2% increase in the prices of those items. This could have an additional benefit of raising the public’s expectation about future inflation, as their beliefs are often said to be influenced by their daily observations about prices of those items that they buy frequently. Keywords: Exchange rate; Pass-through; Expected inflation; CPI by purchase frequency class; Time series analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:37:y:2015:i:c:p:43-58 DOI: 10.1016/j.jjie.2015.06.001 Access Statistics for this article Journal of the Japanese and International Economies is currently edited by Takeo Hoshi More articles in Journal of the Japanese and International Economies from Elsevier |
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