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Testing the Asymmetric Effects of Exchange Rate and Oil Price Pass-Through in BRICS Countries: Does the state of the economy matter?

Mehmet Balcilar (), David Roubaud (), Ojonugwa Usman () and Mark Wohar ()
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David Roubaud: Montpellier Business School, Montpellier, France
Ojonugwa Usman: Department of Economics, Eastern Mediterranean University, North Cyprus

No 15-49, Working Papers from Eastern Mediterranean University, Department of Economics

Abstract: This paper investigates not only the question of whether there is exchange rate and oil price pass-through (EROPPT) but also the extent to which the pass-through is asymmetric or state dependent in the BRICS countries. Using monthly data and the nonlinear Vector Smooth Transition Autoregressive (VSTAR) model, we find evidence of period specific pass-through between the upper and lower regime periods, governed by the selected transition variables. We also find asymmetric pass-through in all the countries with strong evidence of higher pass-through when the size of the shocks to the transition variable moves the system above a threshold level. The result further divulges that output growth asymmetrically reacts to the shocks. The implication of these findings is that the pass-through is strongly affected by the state of the economy.

Keywords: Exchange rate pass-through; Oil price pass-through; Inflation; VSTAR (search for similar items in EconPapers)
JEL-codes: C22 C58 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-ene, nep-mac and nep-mon
Date: 2019-07
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http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-49.pdf First version, 2019 (application/pdf)

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