Exchange Rate Pass-Through in South Asian Countries
Darpajit Sengupta () and
Saikat Sinha Roy
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Darpajit Sengupta: Jadavpur University
A chapter in Risks and Resilience of Emerging Economies, 2023, pp 115-129 from Springer
Abstract:
Abstract This study uses dynamic panel data technique to estimate the exchange rate pass-through (ERPT) elasticity of import prices for a sample of five South Asian countries (Bangladesh, India, Iran, Pakistan, and Sri Lanka). The pass through is found to be imperfect in the short term. This suggests that firms can absorb most of the exchange rate shock and do not pass all the fluctuations on to prices. The dynamic panel results show that marginal costs, trade openness, and country-specific domestic demand are statistically significant variables that explain import price variability. In addition, pass-through elasticity also depends on the depreciation or appreciation of each country’s domestic currency. Insights into exchange rate transmission have important implications for imports, especially intermediate imports, and the use of exchange rates as an important policy tool for controlling inflation.
Keywords: Exchange rate pass-through; Import prices; Dynamic panel data; Panel cointegration; E310; F310; F400 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-99-4063-9_6
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DOI: 10.1007/978-981-99-4063-9_6
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