Ben Cheikh, Nidhaleddine (2012): Non-linearities in exchange rate pass-through: Evidence from smooth transition models.
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This paper examines the presence of non-linear mechanism in the exchange rate pass-through (ERPT) to CPI inflation for 12 euro area (EA) countries. Using smooth transition regression (STR) model, we explore the existence of non-linearities with respect to the inflation environment. We find strong evidence that pass-through respond non-linearly to inflation level for 8 out of 12 EA countries, that is, the transmission of exchange rate is higher when inflation rate surpass some threshold. Our results provide a broad support to the hypothesis suggested by Taylor (2000) that ERPT is decreasing in a lower and more stable inflation environment.
|Item Type:||MPRA Paper|
|Original Title:||Non-linearities in exchange rate pass-through: Evidence from smooth transition models|
|Keywords:||Exchange Rate Pass-Through; Inflation; Smooth Transition Regression Models; Euro Area|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Nidhaleddine Ben Cheikh|
|Date Deposited:||02. Jul 2012 05:50|
|Last Modified:||23. May 2015 23:24|
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Non-linearities in exchange rate pass-through: Evidence from smooth transition models. (deposited 06. Jun 2012 09:34)
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