The Endogeneity of Exchange Rate Pass-Through: Some European Evidence

Ayako Saiki

Open Economies Review, 2015, vol. 26, issue 5, 893-909

Abstract: The decline in exchange rate pass-through (ERPT) in the last three decades is well-documented in the literature. Various studies seek explanations, among which is higher monetary policy credibility. ERPT is often treated as exogenous (i.e., fix coefficient) in policy-makers’ and market participants’ forecasting models. However, if the ERPT is endogenous to monetary policy, it can lead to an error in inflation forecasts and inaccurate policy reaction. Against this backdrop, this paper seeks to examine the endogeneity of exchange rate pass-through to monetary policy, using the European countries as the sample. Copyright Springer Science+Business Media New York 2015

Keywords: Monetary policy; Inflation; Exchange rate; Pass-through; GMM; E52; E31; F31; F41; C23; C26 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s11079-015-9344-1

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