Testing for Structural Breaks in Covariance: Exchange Rate Pass-Through in Canada

Maral Kichian and Lynda Khalaf

No 376, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: Empirical studies looking for changes over time in exchange rate pass-through to consumer prices generally consider the context of a changing inflation mean to examine this issue. This paper allows for endogeneity in exchange rate movements and proposes a new method to test this hypothesis for Canada: A correlated VAR is proposed, and its covariance matrix is tested for breaks. For the latter purposes, we extend the test method proposed in Anderson(1971) to breaks in covariates and to unknown break dates. Our test accounts for breaks in mean, and is exact for fixed regressors. We find strong evidence of structural changes, and a decline over time in pass-through. Nevertheless, we also find that the covariance between Canadian inflation and exchange rates changes has actually increased in the recent period

Keywords: pass-through; structural break test (search for similar items in EconPapers)
JEL-codes: C52 E31 F31 (search for similar items in EconPapers)
Date: 2005-11-11
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:sce:scecf5:376

Access Statistics for this paper

More papers in Computing in Economics and Finance 2005 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().