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Exchange rate pass-through: an analysis of a panel quantile regression

Author

Listed:
  • Yasemin Colak
  • Lutfi Erden

Abstract

The purpose of this study is to examine the degree of exchange rate pass-through (ERPT) with the focus on Taylor (2000)’s hypothesis that asserts ERPT tends to be high (low) in high (low) inflation states. To this end, a panel quantile regression is applied to the data from 37 countries over the period of 1996-2018. The panel quantile regression allows us to capture the distributional heterogeneity in the ERPT coefficient and thus to directly address the question of whether the ERPT degree depends on the inflationary environment. The results indicate that ERPT is low (high) at low (high) quantiles of the inflation rate, supporting Taylor’s hypothesis.  Keywords:  Exchange rate pass-through, Taylor’s Hypothesis, Panel Quantile Regression JEL Codes: C13, E31, F31

Suggested Citation

  • Yasemin Colak & Lutfi Erden, 2021. "Exchange rate pass-through: an analysis of a panel quantile regression," Economics and Business Letters, Oviedo University Press, vol. 10(2), pages 148-156.
    • Handle: RePEc:ove:journl:aid:15002
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/15002
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    More about this item

    Keywords

    â exchange rate pass-through; taylor’s hypothesis; panel quantile regression jel codes: c13; e31; f31;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • 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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