Time-varying exchange rate pass-through: experiences of some industrial countries

Toshitaka Sekine

No 202, BIS Working Papers from Bank for International Settlements

Abstract: This paper estimates exchange rate pass-through of six major industrial countries using a time-varying parameter with stochastic volatility model. Exchange rate pass-through is divided into impacts of exchange rate fluctuations to import prices (first-stage pass-through) and those of import price movements to consumer prices (second-stage pass-through). The paper finds that both stages of pass-through have declined over time for all the sample countries. The decline in second-stage pass-through is associated with the emergence of the low and stable inflation environment as well as a rise in import penetration, while the relationship to the inflation environment is weak for first-stage pass-through.

Keywords: exchange rate pass-through; impacts of commodity prices; time-varying parameter; Markov Chain Monte Carlo; stochastic volatility (search for similar items in EconPapers)
JEL-codes: C11 E31 E58 F40 F41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (108)

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