scholarly journals Exchange Rate Pass-Through in Turkey before and after the Adoption of Inflation Targeting Regime

2017 ◽  
Vol 8 (2) ◽  
pp. 37-48 ◽  
Author(s):  
Özcan Karahan
Keyword(s):  
Exchange Rate ◽  
Inflation Targeting ◽  
Single Equation ◽  
Point Of View ◽  
Turkish Economy ◽  
Before And After ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact

The impact of exchange rate change on the domestic price level which is called as exchange rate pass through has long been of interest in international economics literature. Along with the application of inflation targeting regime widely, the focus of this interest has also evolved to examine the changes in degree and speed of exchange rate pass through under inflation targeting regime. Turkey, adopted Inflation Targeting (IT) as a monetary regime between 2001 and 2006 implicitly and then explicitly, exhibits which was a genuine experience to be analyzed in this respect. From this point of view, the goal of the study is to provide a time-series analysis of exchange rate pass-through for Turkish economy based on single equation Error Correction Model estimation using the monthly data under pre-IT period 1995-2000 and post-IT period 2006-2014. Thus, we try to clarify the effectiveness of inflation targeting regime as monetary policy on the exchange rate pass-through. The findings of the study indicate that the exchange rate pass-through decreased in the post-IT period compared to pre- IT period. Accordingly, it can be argued that the implication of inflation targeting regime reduced exchange rate pass through in Turkey.

The influence of inflation targeting on the pass-through effect of the exchange rate

2018 ◽  
pp. 70-84
Author(s):  
Ph. S. Kartaev ◽  
Yu. I. Yakimova
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Regime ◽  
Short And Long Term ◽  
The Exchange Rate ◽  
Pass Through ◽  
The Impact

The paper studies the impact of the transition to the inflation targeting regime on the magnitude of the pass-through effect of the exchange rate to prices. We analyze cross-country panel data on developed and developing countries. It is shown that the transition to this regime of monetary policy contributes to a significant reduction in both the short- and long-term pass-through effects. This decline is stronger in developing countries. We identify the main channels that ensure the influence of the monetary policy regime on the pass-through effect, and examine their performance. In addition, we analyze the data of time series for Russia. It was concluded that even there the transition to inflation targeting led to a decrease in the dependence of the level of inflation on fluctuations in the ruble exchange rate.

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.

Understanding the exchange rate pass-through to consumer prices in Vietnam: the SVAR approach

2019 ◽  
Vol 15 (5) ◽  
pp. 971-989 ◽  
Author(s):  
Anh The Vo ◽  
Chi Minh Ho ◽  
Duc Hong Vo
Keyword(s):  
Exchange Rate ◽  
Economic Integration ◽  
Global Financial Crisis ◽  
Global Market ◽  
Content Type ◽  
Consumer Prices ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact

Purpose The purpose of this paper is to examine the degree of the exchange rate pass-through (ERPT) to the consumer price index (CPI) at both aggregated and disaggregated levels in Vietnam. Updated data of the nominal effective exchange rate (NEER) and bilateral exchange rate (BiER) have been utilized in this study for the comparison purposes. Design/methodology/approach Advanced time-series approaches such as a structural vector autoregressive framework, structural impulse response functions (SIRFs), and structural forecast-error variance decomposition (SFEVD) are utilized in this paper. Findings Empirical findings from this paper present an incomplete degree of the ERPT to the aggregated CPI. The ERPT based on the BiER is observed to have substantially larger magnitude than the NEER-based pass-through. For the disaggregated level, the degree of the ERPT varies considerably across sub-components of the CPI, with a higher magnitude of the ERPT elasticity being found from the BiER estimations. The index of housing and construction materials has the largest ERPT based on the BiER, followed by the food and foodstuffs (1.00 and 0.56, respectively). The macroeconomic and financial environments as well as an economic integration into the global market may be the main causes of a higher ERPT in Vietnam in comparison with other ASEAN countries. Research limitations/implications The significant and incomplete pass-through of the exchange rate in Vietnam can affect firms’ and households’ budget planning, savings and profits. This finding generally implies that the cost of devaluation of the domestic currency affects the society as the whole in terms of welfare. The State Bank of Vietnam should carefully consider the overall effect of welfares when formulating and implementing strategies of currency devaluation. In addition, the Vietnamese economy becomes more sensitive to external vulnerabilities via changes of the exchange rate during an increasingly economic integration into the global market. In order to maintain inflation stability, it is vitally important to reduce the impact of exchange rate movements on the domestic prices, both aggregated and disaggregated levels, by pursuing either monetary policy credibility or inflation targeting. Originality/value Previous studies on the ERPT literature in the Asia region or for emerging countries focus mainly on the aggregated data of the CPI. Previous studies were conducted before the global financial crisis in 2008/2009. The current paper is the first of its kind to examine the pass-through from exchange rates to consumer prices in Vietnam using both aggregated and disaggregated data.

Foreign debt, conflicting claims and income policies in a Kaleckian model of growth and distribution

2018 ◽  
Vol 9 (1) ◽  
Author(s):  
Pablo Gabriel Bortz ◽  
Gabriel Michelena ◽  
Fernando Toledo
Keyword(s):  
Exchange Rate ◽  
Foreign Debt ◽  
External Debt ◽  
Income Policy ◽  
Demand Distribution ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact ◽  
Kaleckian Model

AbstractThe paper develops a Kaleckian model of growth with endogenous income distribution, determined by conflicting claims on income shares. The article analyzes different demand, distribution and debt regimes, with external debt playing a differential role according to its impact on the exchange rate and on debt-servicing. We further study the impact of a tax-based income policy on the exchange-rate pass-through and external competitiveness. We find that the threat of taxation (or subsidies) can serve as an instrument to coordinate income claims, lower inflationary pressures and improve external price competitiveness.

scholarly journals Exchange Rate Pass-Through in Vietnam under the Impact of Inflationary Environment

2016 ◽  
Vol 23 (03) ◽  
pp. 89-109
Author(s):  
Tho Tran Ngoc ◽  
Trang Nguyen Thi Ngoc
Keyword(s):  
Exchange Rate ◽  
Return To Equilibrium ◽  
Domestic Prices ◽  
Effective Exchange ◽  
The Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Distinct Features ◽  
Effective Exchange Rate ◽  
The Impact

This article addresses the exchange rate pass-through to domestic prices under the impact of inflation. Using TVAR based approach and the variables of inflation, nominal effective exchange rate (NEER), output gap, and interbank rate in addition to monthly data applied to the period of 2000M1–2014M12, we find a non-linear relation in the pass-through to inflation along with the two thresholds of its. Being above or below the thresholds results in different levels of the exchange rate pass-through, which is consistent with previous findings, with unclear/clear evidence found below/above the threshold of 0.3395%/month respectively. In the case of positive shocks of the exchange rate, the inflation is suggested to enormously rise and then return to equilibrium. We also attempt to clarify several distinct features of Vietnam affecting the pass-through and draw a few implications.

scholarly journals Analysis of nominal exchange rate pass-through effect on inflation rate in selected countries

Bankarstvo ◽  
2021 ◽  
Vol 50 (3) ◽  
pp. 8-35
Author(s):  
Aleksandra Živković
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Developed Countries ◽  
Nominal Exchange Rate ◽  
Policy Regime ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
The Impact

Inflation rate is one of the essential macroeconomics variables and it represents the main goal of monetary policy. It is determined by a great number of factors, so it is necessary to analyse the impact their changes have on inflation rate. The purpose of this research is the analysis of the nominal exchange rate pass-through effect on inflation rate in selected emerging and developed countries in the period 2014-2020, which share the same characteristics of inflation targeting, as main monetary policy regime, and managed floating exchange rate, as exchange rate type. Inverse proportion between volatility of nominal exchange rate and inflation rate is proven (depreciation of nominal exchange rate of national currency leads towards the growth of inflation rate), as well as higher pass-through effect in emerging countries compared to developed countries.

scholarly journals The Impact of Financial Dollarization on Inflation Targeting: Empirical Evidence from Serbia

2017 ◽  
Vol 6 (2) ◽  
pp. 23-43 ◽  
Author(s):  
Nikola Fabris ◽  
Nina Vujanović
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Instruments ◽  
Nominal Exchange Rate ◽  
Early Application ◽  
Pass Through ◽  
Financial Dollarization ◽  
Exchange Rate Pass Through ◽  
The Impact

Abstract Serbia has applied inflation targeting against the backdrop of financial dollarization for almost a decade. In such circumstances, efficiency of monetary policy instruments decreases and begs the question of efficiency of the monetary regime efficiency issue. Although there is some empirical testing of financial dollarization effects on monetary policy performance in the inflation targeting regime for some countries, such studies for Serbia mostly cover periods of early application of the regime. Therefore, the authors analysed financial dollarization effects on prices, i.e. exchange rate pass-through effect using Serbia as an example. The study concludes that although unpredictable changes in financial dollarization strongly affect nominal exchange rate, prices level is subject to moderate but persistent increase upon this shock.

scholarly journals Fear of Floating in Turkey

2015 ◽  
Vol 5 (2) ◽  
pp. 288
Author(s):  
Ilyas Sıklar ◽  
Taner Sekmen
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Currency Crises ◽  
Inflation Targeting ◽  
Foreign Exchange Rates ◽  
Before And After ◽  
Floating Exchange Rate ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Fear Of Floating

<p class="ber"><span lang="EN-GB">Many emerging markets have adopted floating exchange rate regimes after currency crises. Turkey has experienced a floating regime since 2002 combined with inflation targeting. The aim of this paper is to investigate the “fear of floating” phenomenon,</span><span lang="EN-GB"> named by Calvo and Reinhart (2002),</span><span lang="EN-GB"> in the transition to a low and stable inflation environment in Turkey before and after inflation targeting. The results demonstrate that the levels of exchange rate pass-through decreased substantially, thus weakening the “fear of floating” phenomenon in Turkey after inflation targeting. Therefore, we argue whether any reactions of the central bank to foreign exchange rates imply the “fear of floating” or the “fear of inflation”</span></p>

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