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http://hdl.handle.net/10419/50636
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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 inflation state-space models causality tests |
| JEL: | | E42 E52 E58 F31 F41 |
| Document Type: | | Working Paper |
| Appears in Collections: | | School of Economics Discussion Papers, University of Kent
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