Exchange Rate Pass-Through to Inflation in the Philippines: Evidence of Asymmetry and Non-linearity​

Jasmin Dacio, Reizle Jade Platitas, Sarah Jane Castañares and Sanjeev Parmanand
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Jasmin Dacio: Bangko Sentral ng Pilipinas
Reizle Jade Platitas: Bangko Sentral ng Pilipinas
Sarah Jane Castañares: Bangko Sentral ng Pilipinas
Sanjeev Parmanand: Bangko Sentral ng Pilipinas

No 202516, BSP Discussion Paper Series from Bangko Sentral ng Pilipinas

Abstract: This paper investigates whether the exchange rate pass-through (ERPT) to inflation varies with the direction and magnitude of change in the nominal exchange rate. Using non-linear and multiple threshold autoregressive distributive lag models, we reconsidered the premise of linearity and symmetry often assumed in the literature on ERPT. We found that in the case of the Philippines, the long-run ERPT is larger and statistically significant during depreciation episodes. Meanwhile, pass-through is limited during appreciation episodes, possibly reflecting the downward stickiness of prices. Further, ERPT tends to be higher at large enough depreciations while it remains limited even during large appreciations. After accounting for asymmetry, the results are consistent with previous studies establishing the decline of ERPT since the Bangko Sentral ng Pilipinas adopted an inflation-targeting framework in 2002.

JEL-codes: E31 E50 F31 F47 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2025-12
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Published as BSP Discussion paper No. 2025-16, December 2025

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Persistent link: https://EconPapers.repec.org/RePEc:bhd:dpaper:202516

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