Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121077
Authors: 
Cheikh, Nidhaleddine Ben
Year of Publication: 
2012
Series/Report no.: 
FIW Working Paper 78
Abstract: 
This paper examines the extent and evolution of exchange rate pass-through (ERPT) using panel cointegration approach. For 27 OECD countries, we provide a strong evidence of incomplete ERPT in sample of 27 OECD countries. Both FM-OLS and DOLS estimators show that pass-through elasticity does not exceed 0.70%. When considering individual estimates, we note a cross-country differences in the long run ERPT. We find that inflation regime and exchange rate volatility are potential macroeconomic sources of this long-run heterogeneity. When focusing on the subsample of 12 European Monetary Union (EMU) countries, our results show a steady decline in the degree of ERPT throughout the different exchange rate arrangements: pass-through elasticity was close to unity during the "snake-in-the tunnel" period while it is about 0.50% since the formation of the euro area. The observed decline in ERPT to import prices was synchronous to the shift towards reduced inflation regime.
Subjects: 
Exchange Rate Pass-Through
Import Prices
Nonstationary Panel data
JEL: 
C23
E31
F31
F40
Document Type: 
Working Paper

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