Asymmetries of the Exchange Rate Pass Through to Domestic Prices: The Case of Costa Rica

Manfred Esquivel Monge and Jose Fabio Gomez Rodriguez
Authors registered in the RePEc Author Service: Fabio Gomez Rodríguez

MPRA Paper from University Library of Munich, Germany

Abstract: By using a logistic smooth transition vector autoregressive model this paper examines whether the exchange rate had asymmetric effects on inflation in Costa Rica during the period 1991-2009. Three basic questions are tried to be answered: Is there any variable that significantly induces asymmetries on the exchange rate pass through? Do positive and negative shocks on exchange rate have symmetric effects on the price level? Is there any evidence that the size of the shocks determines the relative size of the impact on inflation of a given shock on the exchange rate? Among many variables, it is found that lagged change in oil prices is the most appropriate transition variable, which means that it induces the greatest asymmetric effects on the pass-through. On average, when this transition variable is above certain threshold level, the pass-through is two times higher. There is no strong evidence of sign or magnitude asymmetries, which means that the pass-through is expected to be essentially the same when there is a positive or a negative shock on the exchange rate and when such shocks are big or small.

Keywords: Exchange rate pass through; inflation; depreciation; asymmetries; smooth transition models (search for similar items in EconPapers)
JEL-codes: C32 C51 E31 E37 (search for similar items in EconPapers)
Date: 2010-03, Revised 2010-07
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/60251/1/MPRA_paper_60251.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:60251

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().