Asymmetric exchange rate pass-through: Evidence from Peru

Fernando Pérez Forero () and Marco Vega

No 2015-011, Working Papers from Banco Central de Reserva del Perú

Abstract: We study the response of prices to exchange rate shocks for the Peruvian economy in a non-linear context. For that purpose we specify a Structural Vector Autorregressive model (SVAR) and compute impulse-responses functions for prices after exchange rate shocks. We follow Hamilton (2010) and Kilian & Vigfusson (2011), who explore the presence of asymmetric effects on USA output after oil prices shocks that either decrease or increase oil prices. In our setup we analyze shocks that either appreciate or depreciate the local currency under censored exchange rate changes. The results exhibit a remarkable asymmetry in the response of consumer prices and wholesale import good prices, both on impact and on propagation. In absolute value, the effect of a depreciation shock on the consumer price index after one year is about twice the size of that corresponding to an appreciation shock. Roughly speaking, the one-year passthrough to prices is 20 percent under depreciations and only 10 percent after appreciations.

Keywords: Exchange rate pass-through; asymmetric impulse responses; non-linear models (search for similar items in EconPapers)
JEL-codes: C32 E31 F31 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (11)

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