Macroeconomics Determinants of Exchange Rate Pass-through: New Evidence from the Asia-Pacific Region

Duc Vo

MPRA Paper from University Library of Munich, Germany

Abstract: Some recent studies observe an increasing degree of exchange rate pass-through (ERPT) to domestic prices, which has raised questions about the nature of the incompleteness and decline in pass- through. This article reexamines the degree of ERPT to the import, producer, and consumer price indices in Australia, New Zealand, Japan, and Korea in the Asia-Pacific region using up-to-date data, with several important findings. First, we reveal that ERPT to domestic prices follows the distribution chain, in that exchange rate movements alter import prices in the first stage and then producer and consumer prices in the second stage. Second, we offer valid evidence of an increase in ERPT to import prices after the global financial crisis in Japan, Korea, and New Zealand and of a relatively stable ERPT in Australia. Third, the changes in ERPT elasticities are most affected by macroeconomic determinants such as inflation volatility, interest rates, and trade openness, but this varies considerably across the surveyed countries and the three price indices. All our findings make a significant contribution to the empirical literature on ERPT and have policy implications.

Keywords: Asia-Pacific region; exchange rate pass-through (ERPT); inflation (search for similar items in EconPapers)
JEL-codes: E31 F31 F41 (search for similar items in EconPapers)
Date: 2019-01-24
New Economics Papers: this item is included in nep-mac, nep-opm and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: Macroeconomics Determinants of Exchange Rate Pass-Through: New Evidence from the Asia-Pacific Region (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:103293

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