Asymmetric exchange rate pass‐through into import prices of Slovenia's manufacturing sector

Safet Kurtović, Nehat Maxhuni, Blerim Halili and Sead Talović

International Journal of Finance & Economics, 2021, vol. 26, issue 3, 4609-4633

Abstract: The goal of this paper is to estimate the asymmetry of exchange rate pass‐through into aggregate and disaggregate import prices and the composition of imports of Slovenia's manufacturing sectors. We used the nonlinear autoregressive distributed lag model and the monthly data from 2007:M1 to 2017:M12. We found that, in the long run, there was an asymmetry in the complete pass‐through into aggregate import prices due to currency appreciation. Moreover, we found that for 6 out of 14 manufacturing sectors, there was a long‐run asymmetry complete and partial pass‐through due to the appreciation of the nominal effective exchange rate. Compared with depreciation, long‐run appreciation has a stronger impact on aggregate and disaggregate import prices of the manufacturing sectors. On the other hand, we found that there was a short‐run asymmetry due to depreciation in the complete and partial pass‐through for the majority of manufacturing sectors. Compared with appreciation, short‐run depreciation has a stronger impact on aggregate and disaggregate import prices of the manufacturing sectors. The degree of asymmetric pass‐through is higher for aggregate and disaggregate import prices of the manufacturing sectors compared to the degree of symmetric pass‐through. Finally, we confirmed that the degree of pass‐through is higher for homogenous products than for heterogeneous products.

Date: 2021
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https://doi.org/10.1002/ijfe.2033

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