Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/317400 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Business Economics and Management (JBEM) [ISSN:] 2029-4433 [Volume:] 21 [Issue:] 2 [Year:] 2020 [Pages:] 543-563
Publisher: 
Vilnius Gediminas Technical University, Vilnius
Abstract: 
The objective of this paper is to test whether the complete pass-through of exchange rate exists when there are almost no transaction costs and in the environment of competitive market. In general, the literature claims that the pass-through of exchange rate is incomplete due to imperfect market, i.e. the presence of transaction costs and imperfect competition. The quasi-experimental case of the food import to Hong Kong from Mainland China is considered in the analysis. The results show that the pass-through of the exchange rate of Chinese RMB against to US dollar to Hong Kong's food import price is complete in long-run equilibrium. Besides, the short-run adjustment significantly contributes to correcting the deviation from the long-run pass-through effect. Moreover, the complete pass-through still exists after accounting for the effects of asymmetry and volatility. Therefore, this paper contributes to the literature by providing empirical evidence that the complete pass-through of exchange rate can exist in the real world.
Subjects: 
pass-through
exchange rate
RMB
quasi-experimental environment
error correction model
quantile regression
JEL: 
F31
G18
F42
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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