IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v45y2013i36p5062-5075.html
   My bibliography  Save this article

State space models for the exchange rate pass-through: determinants and null/full pass-through hypotheses

Author

Listed:
  • Rafael Martins de Souza
  • Luiz Felipe Pires Maciel
  • Adrian Pizzinga

Abstract

In this article, we formulate linear Gaussian state space models for the estimation of the exchange rate pass-through of the Brazilian Real against the US Dollar, using monthly data from August 1999 to August 2008. The state space/Kalman filtering framework allows the investigation of some empirical aspects previously suggested in the literature, such as time-varying coefficients and null/full pass-through hypotheses. We also test whether some theoretical 'determinants' of the pass-through are statistically significant in the period considered. The principal findings are as follows: (1) the data offer strong support to a time-varying pass-through; and (2) the variance of the exchange rate pass-through, the monetary policy and the trade flow have shown to be relevant determinants of the exchange rate pass-through.

Suggested Citation

  • Rafael Martins de Souza & Luiz Felipe Pires Maciel & Adrian Pizzinga, 2013. "State space models for the exchange rate pass-through: determinants and null/full pass-through hypotheses," Applied Economics, Taylor & Francis Journals, vol. 45(36), pages 5062-5075, December.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:36:p:5062-5075
    DOI: 10.1080/00036846.2013.815397
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2013.815397
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2013.815397?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Arminio Fraga & Ilan Goldfajn & André Minella, 2004. "Inflation Targeting in Emerging Market Economies," NBER Chapters, in: NBER Macroeconomics Annual 2003, Volume 18, pages 365-416, National Bureau of Economic Research, Inc.
    2. Campa, Jose M. & Goldberg, Linda S., 2002. "Exchange rate pass-through into import prices: A macro or micro phenomenon?," IESE Research Papers D/475, IESE Business School.
    3. Durbin, James & Koopman, Siem Jan, 2012. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, edition 2, number 9780199641178.
    4. Ilan Goldfajn & Rodrigo O. Valdés, 1999. "The Aftermath of Appreciations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 229-262.
    5. Toshitaka Sekine, 2006. "Time-varying exchange rate pass-through: experiences of some industrial countries," BIS Working Papers 202, Bank for International Settlements.
    6. Ilan Goldfajn & Sérgio Ribeiro da Costa Werlang, 2000. "The Pass-through from Depreciation to Inflation: A Panel Study," Working Papers Series 5, Central Bank of Brazil, Research Department.
    7. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fixing for Your Life," NBER Working Papers 8006, National Bureau of Economic Research, Inc.
    8. Joseph E. Gagnon & Jane E. Ihrig, 2001. "Monetary policy and exchange rate pass-through," International Finance Discussion Papers 704, Board of Governors of the Federal Reserve System (U.S.).
    9. Ms. Agnes A Belaisch, 2003. "Exchange Rate Pass-Through in Brazil," IMF Working Papers 2003/141, International Monetary Fund.
    10. Dionísio Dias Carneiro & André Monteiro D´Almeida Monteiro & Thomas Wu, 2002. "Mecanismos não-lineares de repasse cambial para o IPCA," Textos para discussão 462, Department of Economics PUC-Rio (Brazil).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rodriguez, Gabriel & Castillo B., Paul & Calero, Roberto & Salcedo Cisneros, Rodrigo & Ataurima Arellano, Miguel, 2024. "Evolution of the exchange rate pass-through into prices in Peru: An empirical application using TVP-VAR-SV models," Journal of International Money and Finance, Elsevier, vol. 142(C).
    2. Sebastian Edwards & Luis Cabezas, 2021. "Exchange rate pass-through, monetary policy, and real exchange rates - Iceland and the 2008 crisis," Economics wp85, Department of Economics, Central bank of Iceland.
    3. Suleyman Hilmi Kal & Ferhat Arslaner & Nuran Arslaner, 2015. "Sources of Asymmetry and Non-linearity in Pass-Through of Exchange Rate and Import Price to Consumer Price Inflation for the Turkish Economy during Inflation Targeting Regime," Working Papers 1530, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    4. Sana Ben Abdallah & Dhafer Saidane & Mihaly Petreczky, 2023. "Application of Robust Control for CSR Formalization and Stakeholders Interest," Computational Economics, Springer;Society for Computational Economics, vol. 62(3), pages 891-934, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ozkan, Ibrahim & Erden, Lutfi, 2015. "Time-varying nature and macroeconomic determinants of exchange rate pass-through," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 56-66.
    2. Hiroyuki Taguchi & Woong-Ki Sohn, 2014. "Inflation Targeting and the Pass-through Rate in East Asian Economies," Asian Economic Journal, East Asian Economic Association, vol. 28(2), pages 139-159, June.
    3. Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June.
    4. Dubravko Mihaljek & Marc Klau, 2008. "Exchange rate pass-through in emerging market economies: what has changed and why?," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 103-130, Bank for International Settlements.
    5. Martins Bitans, 2004. "Pass-Through of Exchange Rates to Domestic Prices in East European Countries and the Role of Economic Enviroment," Working Papers 2004/04, Latvijas Banka.
    6. Antonio Forte, 2009. "The pass-through effect: a twofold analysis," EERI Research Paper Series EERI_RP_2009_08, Economics and Econometrics Research Institute (EERI), Brussels.
    7. Atif Ali Jaffri, 2010. "Exchange Rate Pass-through to Consumer Prices in Pakistan: Does Misalignment Matter?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(1), pages 19-35.
    8. Reginaldo P. Nogueira Jnr, 2006. "Inflation Targeting and the Role of Exchange Rate Pass-through," Studies in Economics 0602, School of Economics, University of Kent.
    9. Shambaugh, Jay, 2008. "A new look at pass-through," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 560-591, June.
    10. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
    11. Kohlscheen, Emanuel, 2010. "Emerging floaters: Pass-throughs and (some) new commodity currencies," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1580-1595, December.
    12. corrinne ho & robert n mccauley, 2004. "Living with flexible exchange rates:," International Finance 0411003, University Library of Munich, Germany.
    13. Jean-Pierre Allegret, 2007. "Which Currency Exchange Regime for Emerging Markets? Corner Solutions under Question," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 54(4), pages 397-427, December.
    14. Jeffrey Frankel & David Parsley & Shang-Jin Wei, 2012. "Slow Pass-through Around the World: A New Import for Developing Countries?," Open Economies Review, Springer, vol. 23(2), pages 213-251, April.
    15. Nogueira, Veridiana de Andrade & Mori, Rogério & Marçal, Emerson Fernandes, 2013. "Transmissão da variação cambial para as taxas de inflação no Brasil: estimação do pass-through através de modelos de vetores autorregressivos estruturais com correção de erros," Textos para discussão 349, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    16. Jeffrey A. Frankel, 2010. "Monetary Policy in Emerging Markets: A Survey," NBER Working Papers 16125, National Bureau of Economic Research, Inc.
    17. Corrinne Ho & Robert N. McCauley, 2003. "Living with flexible exchange rates: issues and recent experience in inflation targeting emerging market economies," BIS Working Papers 130, Bank for International Settlements.
    18. Chang Shu & Xiaojing Su, 2009. "Exchange Rate Pass‐through in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(1), pages 33-46, January.
    19. Jane E. Ihrig & Mario Marazzi & Alexander D. Rothenberg, 2006. "Exchange-rate pass-through in the G-7 countries," International Finance Discussion Papers 851, Board of Governors of the Federal Reserve System (U.S.).
    20. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:45:y:2013:i:36:p:5062-5075. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.