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Asymmetric effects of exchange rate variations: An empirical analysis for four advanced countries

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  • Hayet Jihene Elbejaoui

Abstract

This paper investigates possible asymmetries in the reaction of export and import prices to changes in the exchange rate for 4 advanced countries between the 1981q1 and2011q2 period. This exercise is conducted using an asymmetric cointegrating autoregressive distributed lag (ARDL) model, with positive and negative partial sum decompositions of the nominal exchange rates. Our results show evidence of asymmetric ERPT to appreciations and depreciations, meaning that export and import prices respond differently depending on the direction of the exchange rate variation. In particular, we find that appreciations are more passed through to export and import prices than depreciations. This result has important implications in terms of monetary policy.

Suggested Citation

  • Hayet Jihene Elbejaoui, 2013. "Asymmetric effects of exchange rate variations: An empirical analysis for four advanced countries," International Economics, CEPII research center, issue 135-136, pages 29-46.
    • Handle: RePEc:cii:cepiie:2013-q3-4-135-136-3
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    Cited by:

    1. Misbah Nosheen & Beenish Chohan & Javed Iqbal & Mark Wohar, 2023. "Asymmetric response of domestic production to exchange rate changes: Evidence from southeast Asian countries," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 37(2), pages 54-75, November.
    2. Sy-Hoa HO, 2015. "Long-run determinants of sovereign bond index in emerging market: New evidence from asymmetric and nonlinear pass-through," Documents de recherche 15-02, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    3. Bahmani-Oskooee, Mohsen & Arize, Augustine C., 2022. "The effect of exchange rate volatility on U.S. bilateral trade with Africa: A symmetric and asymmetric analysis," Economic Systems, Elsevier, vol. 46(1).

    More about this item

    Keywords

    Exchange rate pass-through; Asymmetry; ARDL; Export price; Import price;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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