Template-Type: ReDIF-Paper 1.0
Author-Name: Martins Bitans
Author-X-Name-First: Martins
Author-X-Name-Last: Bitans
Author-Workplace-Name: Bank of Latvia
Title: Pass-Through of Exchange Rates to Domestic Prices in East European Countries and the Role of Economic Enviroment
Abstract: The paper examines the exchange rate pass-through in a set of 13 East European countries during the period of 1993–2003. The pass-through estimates are derived from a recursive VAR model in first differences, and the impact of exchange rate changes on both producer and consumer prices is studied. The estimates obtained for two sub-sample periods generally show an incomplete pass-through over a two-year horizon. In addition, the results imply a considerable cross-country variation and suggest that a significant decline (by nearly 50%) in the pass-through is possible over time. In particular, it is found that the exchange rate pass-through in East European countries is positively and statistically significantly related to the average inflation rate and degree of exchange rate persistence. Moreover, the results confirm the existence of a strong relationship between the pass-through and changes in the import structure. Finally, there is some limited evidence that the magnitude of exchange rate pass-through might be positively related to the degree of country's openness to foreign trade.
Creation-Date: 2004-12-30
File-URL: https://www.bank.lv/public_files/images/img_lb/izdevumi/english/citas/Pass-Trough_Exchange_Rates.pdf
File-Format: Application/pdf
File-URL: https://www.macroeconomics.lv/sites/default/files/pass-trough_exchange_rates.pdf
File-Format: Application/pdf
Number: 2004/04
Classification-JEL: C32, E31, E52
Keywords: pass-through of exchange rate, recursive VAR model, Exchange Rate Mechanism II
X-File-Ref: https://repec.bank.lv/refs/wpaper200404.txt
Handle: RePEc:ltv:wpaper:200404