Ben Cheikh, Nidhaleddine (2013): Exchange Rate and Consumer Prices in the Euro Area: A Cointegrated VAR Analysis.
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Abstract
This paper analyzes the exchange rate pass-through (ERPT) into consumer prices for 12 EA countries within a CVAR framework. Using the Johansen cointegration procedure, results indicate the existence of one cointegrating vectors at least for each EA country of our sample. When measuring the long-run effect of exchange rate changes on consumer prices, we found a wide dispersion of ERPT elasticities, especially between “peripheral” and “core EA” economies. For instance, consumer prices rise by 84% in Portugal following one percent depreciation of exchange rate, while for the German economy the extent of pass-through is not exceeding 0.20%. Besides, the loading factors point out a very slow adjustment of consumer prices towards their long-run equilibrium across EA countries. This would explain the weakness of ERPT estimates in the short-run.
Item Type: | MPRA Paper |
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Original Title: | Exchange Rate and Consumer Prices in the Euro Area: A Cointegrated VAR Analysis |
Language: | English |
Keywords: | Exchange Rate Pass-Through, Inflation, Cointegration |
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 |
Item ID: | 51162 |
Depositing User: | Nidhaleddine Ben Cheikh |
Date Deposited: | 04 Nov 2013 12:22 |
Last Modified: | 28 Sep 2019 16:40 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/51162 |
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