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Asymmetry and non-linearity in exchange rate pass-through: Evidence from scanner data

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  • Kim, In Kyung
  • Lee, Jinhyuk
  • Im, Hyejoon

Abstract

Using retail scanner data from Kazakhstan, an emerging economy with significant and unexpected exchange rate fluctuations, we observe an incomplete yet substantial exchange rate pass-through (ERPT) into prices. Specifically, we note a 50% change occurring a year after the initial shock. The ERPT demonstrates asymmetry in response to exchange rate movements. Notably, the direction of this asymmetry is opposite for imported versus domestic products. Furthermore, our findings indicate that ERPT is non-linear; the price response is more pronounced when the exchange shock is small, aligning with the existence of menu costs. Understanding these asymmetric and non-linear price responses to exchange rate shocks may be crucial for formulating effective inflation targeting policies, especially in emerging economies prone to high inflation.

Suggested Citation

  • Kim, In Kyung & Lee, Jinhyuk & Im, Hyejoon, 2024. "Asymmetry and non-linearity in exchange rate pass-through: Evidence from scanner data," Journal of International Money and Finance, Elsevier, vol. 149(C).
  • Handle: RePEc:eee:jimfin:v:149:y:2024:i:c:s0261560624001803
    DOI: 10.1016/j.jimonfin.2024.103193
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange rate pass-through; Consumer prices; Scanner data; Inflation dynamics;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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