Long Run Exchange Rate Pass-Through: Evidence from New Panel Data Techniques
Nidhaleddine Ben Cheikh ()
Economics Working Paper Archive (University of Rennes 1 & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS
This paper examines the exchange rate pass-through (ERPT) into import prices using recent panel data techniques. For a sample of 27 OECD countries, panel cointegration tests provide an evidence for the existence of long-run equilibrium relationship in pass-through equation. Following Pedroni (2001), we employ both FM-OLS and DOLS estimators and show that long-run ERPT elasticity does not exceed 0.70%. Individual estimates of ERPT are heterogeneous across 27 OECD countries, ranging from 0.23% in France to 0.98% in Poland. When we look for the macroeconomic determinants of this long-run heterogeneity, we implement a panel threshold methodology as introduced by Hansen (2000). Our results indicate a regime-dependence of ERPT, that is, countries with higher inflation regime and more exchange rate volatility would experience a higher degree of pass-through.
Keywords: Exchange Rate Pass-Through; Import Prices; Panel Cointegration; Panel Threshold (search for similar items in EconPapers)
JEL-codes: C23 E31 F31 F40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon and nep-opm
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Journal Article: Long-run exchange rate pass-through: evidence from new panel data techniques (2012)
Working Paper: Long run exchange rate pass-through: Evidence from new panel data techniques (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:tut:cremwp:201225
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