Asymmetric exchange rate pass-through: Evidence from major countries

Anne-Laure Delatte and Antonia Lòpez-Villavicencio ()
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Antonia Lòpez-Villavicencio: CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique
Authors registered in the RePEc Author Service: Antonia López Villavicencio

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Abstract: The aim of this paper is to investigate the asymmetric effect of exchange rate variations on prices over the short- and long-run in four major developed countries. To this end, we estimate a mark-up model for prices using a novel and simple asymmetric cointegrating model, with positive and negative partial sum decomposition of the nominal exchange rates. Our results show that prices react differently to appreciations and depreciations over the long-run, an effect that was previously ignored in the literature. In particular, we provide evidence that depreciations are passed through prices more than appreciations, a result that might suggest weak competition structures. This result has important implications for the proper conduct of monetary policy.

Keywords: Exchange rate pass-through; Inflation; Asymmetry; ARDL (search for similar items in EconPapers)
Date: 2012-09
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Citations: View citations in EconPapers (152)

Published in Journal of Macroeconomics, 2012, Vol. 34 (n° 3), p. 833-844. ⟨10.1016/j.jmacro.2012.03.003⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00779761

DOI: 10.1016/j.jmacro.2012.03.003

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