scholarly journals Analysis of Exchange Rate Pass-Through in Indonesia With VECM Approach

2019 ◽  
Vol 2 (2) ◽  
pp. 424-435
Author(s):  
Nor Malisa ◽  
Karsinah Karsinah
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Price Index ◽  
Wholesale Price ◽  
Impulse Response Function ◽  
Import Price ◽  
Producer Price ◽  
Import Price Index ◽  
The Exchange Rate ◽  
Pass Through

The  purpose  of  this  research  is  to  determine  and  analyze  the degree of pass-through in Indonesia, which calculated from the cumulative response of the exchange rate to the CPI and the exchange rate on the exchange rate it self. Data used in this research is quarterly from 1997Q3 to 2017Q4. The variables used in this research are consumer price, rupiah to dollar exchange rate, producer price index, import price index, SBI interest rates, US wholesale price index. Data has sourced by Bank Of Indonesia and International Monetary Fund. The method used in this research is Vector Error Correction Model (VECM). The results showed that in the long-term exchange rate, producer price index, import price index, US wholesale price index had a positive effect on CPI while SBI interest rates had a negative effect to the consumer price. The impulse response function test states that in the first quarter only the variable itself was responded by the CPI, the second quarter import price index at the most by 1.2% was able to respond to the CPI. The results of the pass-through degree in Indonesia show that producer price is 0.009 and consumer price is -0.002. The result of variance decomposition shows that the import price index has the largest contribution in influencing the consumer price index. Have to reduce imports of raw materials for self-consumption, but have to import for re-export, so that domestic prices in Indonesia are stable. Tujuan penelitian ini untuk mengetahui dan menganalisis derajat pass-through di Indonesia yang dihitung dari kumulasi respon kurs terhadap IHK dan kurs terhadap kurs. Data yang digunakan dalam penelitian ini adalah data time series triwulan dari tahun 1997Q3 hingga 2017Q4.Variabel yang digunakan dalam penelitian ini antara lain indeks harga konsumen, nilai tukar rupiah per dolar, indeks harga produsen, indeks harga impor, suku bunga SBI, indeks harga perdagangan besar AS. Metode yang digunakan adalah Vector Error Correction model (VECM). Hasil penelitian menunjukkan bahwa pada jangka panjang variabel nilai tukar,indeks harga produsen, indeks harga impor, indeks harga perdagangan besar AS berpengaruh positif terhadap IHK sedangkan suku bunga SBI berpengaruh negatif terhadap IHK. Hasil uji impulse response function menyatakan bahwa pada kuartal pertama hanya variabel itu sendiri yang direspon oleh IHK, kuartal kedua indeks harga impor paling besar sebesar 1.2% mampu direspon IHK. Hasil derajat pass-through indeks harga produsen sebesar 0.009 dan indeks harga konsumen sebesar -0.002. Hasil variance decomposition menunjukkan bahwa indeks harga impor mempunyai kontribusi terbesar dalam mempengaruhi indeks harga konsumen. Perlu mengurangi impor bahan baku untuk konsumsi sendiri, namun mengimpor untuk diekspor kembali supaya tingkat harga domestik di Indonesia stabil.

EXCHANGE RATE AND US MACROECONOMY: EVIDENCE FROM THE FACTOR-AUGMENTED VECTOR AUTOREGRESSIVE MODEL

2017 ◽  
Vol 62 (02) ◽  
pp. 483-508
Author(s):  
LIAN AN ◽  
XIAOMEI REN ◽  
HUIMIN LI ◽  
JING XU
Keyword(s):  
Exchange Rate ◽  
Price Index ◽  
Impulse Response Function ◽  
Import Price ◽  
Current Account Balance ◽  
Producer Price ◽  
Vector Autoregressive ◽  
Exchange Rate Movements ◽  
Dollar Depreciation ◽  
Merchandise Trade

This paper aims to examine the macroeffects of exchange rate movements on a wide array of real economic variables in the US in a unifying model. By employing the non-linear factor-augmented vector autoregressive (FAVAR) model with simulation methods, we could trace the effects of exchange rate appreciation and depreciation on a wide array of macroeconomic variables through the impulse response function (IRF). The main findings are: (1) In response to dollar depreciation, import price index (IMP), producer price index (PPI) and CPI increase significantly. The pass-through ratio declines along the distribution chain. (2) Merchandise trade balance, current account balance and output improve facing dollar depreciation. (3) Savings decreases in response to dollar depreciation. (4) Employment and average hourly earnings increase in times of exchange rate depreciation and vice versa. The effects on macroeconomy from appreciation and depreciation seem symmetric. Many other interesting findings are also documented.

scholarly journals The Analysis of Exchange Rate Pass-Through in Indonesia

2019 ◽  
Author(s):  
Karsinah . ◽  
Sucihatiningsih Dian Wisika Prajanti ◽  
Widiyanto . ◽  
Nor Malisa
Keyword(s):  
Exchange Rate ◽  
Price Index ◽  
Consumer Price Index ◽  
Import Price ◽  
Series Data ◽  
Short Term ◽  
Import Price Index ◽  
Pass Through ◽  
Exchange Rate Pass Through

The aims of this research are to identify and analyze the exchange rate pass through towards domestic price in Indonesia. The aforementioned objective is reflected through the short-term and long-term influence variable, inflation fluctuation response due to other macroeconomic shock variable, which then reveals the characteristics of pass-through degree in Indonesia. The data used on this research was the quarter time series data from 1997 Q3 until 2017Q4. The variable used in this research were Consumer Price Index, Rupiah exchange value per Dollar, Import Price Index and SBI Interest Rate. The resource of the data variable were from Bank Indonesia and International Monetary Fund (IMF). The method being employed was Vector Error Correction Model (VECM). The result of the research shows that in the long-term and short-term period, all variable influences inflation by a different lag. Moreover, the impulse response function assessment reveals that shock variable of import price index receives a positive response by consumer price index. The result of variance decomposition assessment also concludes that the import price index has the biggest contribution.

scholarly journals Does the Incomplete Exchange Rate Pass-through Exist in Sudan?

2021 ◽  
Vol 3 (1) ◽  
pp. 147-163
Author(s):  
Ahmed Abdu Allah Ibrahim ◽  
Mohamed Sharif Bashir
Keyword(s):  
Exchange Rate ◽  
Price Index ◽  
Forecast Error ◽  
Import Price ◽  
Nominal Exchange Rate ◽  
Domestic Price ◽  
Variance Decompositions ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through

The purpose of this paper is to examine the nominal exchange rate pass-through to domestic prices in Sudan from 1978–2017. An autoregressive distributed lag (ARDL) approach to cointegration is employed. The analysis is based on impulse response functions (IRFs) and forecast error variance decompositions (FEVDs). The dynamics of the cointegrated system can be investigated via the variance decompositions and IRFs. The findings confirm that the degree of exchange rate pass-through in Sudan is incomplete, and the empirical results also show that the domestic price index is predominantly caused by foreign price in both the short and long runs, in addition to the import price index and the nominal exchange rate; the exchange rate shock has a negative effect on the domestic price. Furthermore, FEVDs analysis illustrates that the variation in domestic price is primarily determined by the import prices, while changes in the exchange rate are primarily determined by the exchange rate itself.

scholarly journals The Relationship between the Exchange Rate, Interest Rate and Inflation: The Case of Turkey

2020 ◽  
Vol 67 (2) ◽  
pp. 259-275
Author(s):  
Ercan Özen ◽  
Letife Özdemir ◽  
Simon Grima
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Price Index ◽  
Consumer Price Index ◽  
Producer Price ◽  
United States Dollar ◽  
The Exchange Rate ◽  
The Interest Rate

The purpose of the study is to measure the effects of changes in exchange rates and interest rates on inflation and to determine which of the exchange rates or interest rates has a greater impact on inflation rate following the July 15, 2016 coup attempt in Turkey. Our expectation is that similar to most authors is to find that there is a long-term relationship between the inflation rates and both the exchange rate and interest rates and that the effect of the exchange rate on the Producer Price Index (PPI) is greater than that of the interest rates. Moreover, we expect to find a unidirectional causality relationship between the Interest Rate of Commercial Banks Credit (IRBC), Over Night Interest Rate (O/N) and United States Dollar (USD) and the PPI, but not between the IRBC, O/N, USD and the Consumer Price Index (CPI).

scholarly journals Exchange Rate Pass Through in a Small Open Economy: A case study of West African Monetary Zone

2013 ◽  
Vol 9 (4) ◽  
pp. 275-290
Author(s):  
Rahman olanrewaju Raji
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Price Index ◽  
Time Series Data ◽  
Consumer Price Index ◽  
Import Price ◽  
Series Data ◽  
Import Prices ◽  
Pass Through ◽  
Exchange Rate Pass Through

The  study investigated the magnitude of exchange rate pass through to import prices and domestic prices    (consumer price index) in WAMZ economy using quarterly time-series data between 2000 and 2010 with the aids of Vector autoregressive (VAR) modeling technique supported with Johansen co-integration approach cross country analysis comprising of Gambia, Ghana, Nigeria and Sierra-Leone. The study discovered that transmission of exchange rate to import prices is more when compared with consumer price in the zone while the contributions of exchange rate to import price are not less 13 percent at average in entire zone. Consumer price index was explained by exchange rate pass through with an average of 26 percent in the zone where the pass through to consumer price is less than two percent in Ghanaian economy. The Taylor (2000) hypothesis was observed in the study where Ghana and Nigeria are the outlier economies while Nigeria established a positive relationship between interest rate volatility and exchange rate pass through to import prices.

scholarly journals Exchange Rate Pass-Through to Domestic Prices: Evidence from OECD Countries

2017 ◽  
Author(s):  
Harun Bal ◽  
Mehmet Demiral ◽  
Filiz Yetiz
Keyword(s):  
Exchange Rate ◽  
Panel Data ◽  
Price Index ◽  
Oecd Countries ◽  
Domestic Prices ◽  
Macroeconomic Indicators ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Changes ◽  
Exchange Rate Pass Through

There is an immense literature on the effects of exchange rate changes on macroeconomic indicators, specifically on the trade balance, growth, inflation, and overall productivity in open economies. One of the main attempts in the related literature is about ascertaining whether the exchange rate fluctuations alter domestic prices. This possible mechanism is called as the pass-through effect which is getting more important since the argument that exchange rate adjustment is a part of the solution for global rebalancing is empirically well-supported. Starting from this claim, this study purposes to explore whether there is an exchange rate pass-through effect in 19 high-income OECD countries over the period 1990-2015. To this end, using a panel data set of consumer price index, producer price index proxied by wholesale price index, the nominal effective exchange rates, and industrial production presented by the value-added share of industry sectors in gross domestic product, structural vector autoregressive (VAR) and autoregressive distributed lag (ARDL) models are estimated in an unbalanced panel data analysis procedure. Results reveal that exchange rate pass-through effects on the domestic prices are significant but not that strong in both the short-run and the long-run. Expectedly, the pass-through effects tend to diminish over time. The study concludes that policy-makers need to consider policy actions accompanying the exchange rate changes to ensure domestic price stability which consequently interacts with many macroeconomic indicators.

scholarly journals Exchange rate pass-through to inflation in Egypt: a structural VAR approach

2018 ◽  
Vol 3 (2) ◽  
pp. 2-19 ◽  
Author(s):  
Omneia Helmy ◽  
Mona Fayed ◽  
Kholoud Hussien
Keyword(s):  
Exchange Rate ◽  
Price Index ◽  
Structural Var ◽  
Empirical Literature ◽  
Content Type ◽  
The Exchange Rate ◽  
Exchange Rate Shocks ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact

Purpose The theoretical and empirical literature stipulated that exchange rate shocks do influence the domestic price of imports. Hence, this paper aims to investigate the underlying relationship between the exchange rate and prices known as the exchange rate pass-through. Design/methodology/approach The paper uses a structural vector auto-regression (SVAR) model, drawing on Bernanke (1986) and Sims (1986), to empirically examine and analyze the pass-through of exchange rate fluctuations to domestic prices in Egypt. Findings The empirical results of the monthly data between 2003 and 2015 revealed that the exchange rate pass-through in Egypt is fairly substantial but incomplete and slow in the three price indices [IMP, producer price index and consumer price index (CPI)]. However, the impact is more prominent for consumer prices than for any other price index. This finding could be attributed to the fact that the CPI in Egypt is composed of a relatively large number of subsidized commodities and goods with administered prices as well as the authorities’ behavior in manipulating prices (i.e. export ban). This is expected to weaken the transmission of exchange rate shocks. Practical implications The result has interesting implications for Egypt’s ability to attain an effective inflation targeting regime. Originality/value The study contributes to the literature by assessing the effect of changes in the exchange rate (the Egyptian £ vis-à-vis the US$) on prices using an updated time series from 2003 to 2015. It addresses the limitations of the study of Nafie et al. (2004), which found no strong relationship between the exchange rate and inflation rate in the Egyptian context. One of these limitations was using the CPI, as the only price index.

scholarly journals Analysis of Effect Macro Variable on International Trade of Indonesia

2016 ◽  
Vol 6 (2) ◽  
pp. 228
Author(s):  
Evania Rahma Octavia ◽  
Dwi Wulandari
Keyword(s):  
International Trade ◽  
Exchange Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Price Index ◽  
Time Series Data ◽  
Consumer Price Index ◽  
Series Data ◽  
The Exchange Rate ◽  
Macro Variables

This study aims to determine the effect of macro variables which include Indonesia's real gross domestic income, money supply, consumer price index and interest rates on international trade mediated by the exchange rate of rupiah against the dollar. This type of research is descriptive research with quantitative approach. Determination of the sample based on quarterly time series data 2010-2014. This study uses path analysis. The results showed domestic gross product, the money supply, and interest rates together  have a significant effect on the exchange rate but the consumer price index do not have significant effect on the exchange rate. The results also show that the exchange rate has no significant effect on imports and exports. 

Sign in / Sign up

Export Citation Format

Share Document