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|Title:||Is low inflation really causing the decline in exchange rate pass-through? |
|Authors:||Nogueira Júnior, Reginaldo P.|
León-Ledesma, Miguel A.
|Issue Date:||2010 |
|Series/Report no.:||School of Economics discussion papers 10,02|
|Abstract:||Recent literature has argued that exchange rate pass-through (ERPT) into domestic inflation has been declining in many countries following a dramatic change in inflation environment during the 1990s. Available empirical results face two central challenges: (i) the evidence on declining ERPT is mostly based on sample-splitting approaches and hence subject to a degree of arbitrariness; and (ii) the link between a lower ERPT and inflation environment is usually based on simple correlation analysis and hence silent about temporal causality. We address these issues by making use of a state-space model that allows ERPT to be time-varying and dependent on the inflation environment.|
|Subjects:||exchange rate pass-through|
|Document Type:||Working Paper|
|Appears in Collections:||School of Economics Discussion Papers, University of Kent|
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