Exchange rate pass-through and inflation: A nonlinear time series analysis

Mototsugu Shintani, Akiko Terada-Hagiwara, Tomoyoshi Yabu

Research output: Contribution to journalArticle

30 Citations (Scopus)

Abstract

This paper investigates the relationship between the exchange rate pass-through (ERPT) and inflation by estimating a nonlinear time series model. Based on a simple theoretical model of ERPT determination, we show that the dynamics of ERPT can be well approximated by a class of smooth transition autoregressive (STAR) models using the past inflation rate as a transition variable. We employ several U-shaped transition functions in the estimation of the time-varying ERPT to US domestic prices. The estimation result suggests that declines in the ERPT during the 1980s and 1990s are associated with lowered inflation.

Original languageEnglish
Pages (from-to)512-527
Number of pages16
JournalJournal of International Money and Finance
Volume32
Issue number1
DOIs
Publication statusPublished - 2013

Fingerprint

Time series analysis
Inflation
Nonlinear time series
Exchange rate pass-through
Smooth transition
Time-varying
Inflation rate
Time series models
Autoregressive model

Keywords

  • Import prices
  • Inflation indexation
  • Pricing-to-market
  • Smooth transition autoregressive models
  • Sticky prices

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

Exchange rate pass-through and inflation : A nonlinear time series analysis. / Shintani, Mototsugu; Terada-Hagiwara, Akiko; Yabu, Tomoyoshi.

In: Journal of International Money and Finance, Vol. 32, No. 1, 2013, p. 512-527.

Research output: Contribution to journalArticle

Shintani, Mototsugu ; Terada-Hagiwara, Akiko ; Yabu, Tomoyoshi. / Exchange rate pass-through and inflation : A nonlinear time series analysis. In: Journal of International Money and Finance. 2013 ; Vol. 32, No. 1. pp. 512-527.
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