Role of Exchange Rate Volatility in Exchange Rate Pass-Through to Import Prices: Some Evidence from Japan
Guneratne Wickremasinghe and
Param Silvapulle ()
International Finance from University Library of Munich, Germany
This paper investigates the effect of exchange rate volatility on the degree of exchange rate pass-through in Japan for the period January 1975 to June 1997. Although several studies put forward theoretical arguments for the volatility-domestic import price relationship, only a very few studies produced empirical evidence. The volatility of contractual currency based exchange rate index returns was modelled using GARCH-type processes with skewed student t-distribution, capturing the typical nature of exchange rate returns. Using a three-state regime switching threshold model, we examine the response of import prices, the degree of pass-through in particular, to different volatility regimes, low, medium and high. The results show that the exchange rate pass- through coefficient is significantly different across all three volatility regimes only during recession.
JEL-codes: F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-ifn
Note: Type of Document - pdf; pages: 29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0406006
Access Statistics for this paper
More papers in International Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().