Barhoumi, Karim (2006): Exchange Rate Pass-Through and Structural Macroeconomic Shocks in Developing Countries: An Empirical Investigation.
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This paper investigates the exchange rate pass-through in 12 developing countries during the period 1980-2001 by adopting a new formulation . Rather than considering the traditional approach based on the exogenous exchange rate movement through correlation between exchange rate and prices, we focus on fundamental macroeconomic shocks that a¤ect both exchange rate and prices. In order to do that, we employ long-run restrictions à la Blanchard and Quah (1989) to identify the di¤erent shocks through an open economic macroeconomic model (ISLM framework). We use two empirical methodology : Structural VECM methodology used by Jang and Ogaki (2004) and the common trends approach proposed by Warne et al (1992). This allows us to calculate the pass-through as the responses of the exchange rate, CPI and import prices to the supply, the relative demand, the nominal and the foreign prices shocks. We show that the pass-through ratio in developing countries is di¤erent when considering di¤erent structural shocks.
|Item Type:||MPRA Paper|
|Original Title:||Exchange Rate Pass-Through and Structural Macroeconomic Shocks in Developing Countries: An Empirical Investigation.|
|Keywords:||Exchange rate pass-through, Developing countries, Long-run restrictions, Structural VECM, Common trend, Impulse response functions|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Barhoumi karim|
|Date Deposited:||04. Jan 2008 14:49|
|Last Modified:||14. Mar 2015 11:05|
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