Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico
This paper applies a nonlinear Autoregressive Distribute Lag to examine the exchange rate pass-through into consumer price inflation in Mexico. Overall, the evidence confirmed that ignoring the asymmetric (sign) effect of exchange rate movements on inflation may lead to incorrect inferences and poli...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Elsevier
2017
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| Online Access: | http://psasir.upm.edu.my/id/eprint/60966/ http://psasir.upm.edu.my/id/eprint/60966/1/Asymmetric%20exchange%20rate%20pass-through%20in%20an%20emerging%20market%20economy%20the%20case%20of%20Mexico.pdf |
| _version_ | 1848854309846908928 |
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| author | Baharumshah, Ahmad Zubaidi Fagir Omer, Abdalla Sirag Siew, Voon Soon |
| author_facet | Baharumshah, Ahmad Zubaidi Fagir Omer, Abdalla Sirag Siew, Voon Soon |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This paper applies a nonlinear Autoregressive Distribute Lag to examine the exchange rate pass-through into consumer price inflation in Mexico. Overall, the evidence confirmed that ignoring the asymmetric (sign) effect of exchange rate movements on inflation may lead to incorrect inferences and policy conclusions. Exchange rate fluctuation is transferred to prices level more during currency depreciation than appreciation. We compare the macroeconomic performances between pre- and post-inflation targeting, and our findings reaffirmed that the pass-through has weakened significantly after launching inflation targeting in 2001. This result implies that low inflation in the sample period examined is good for Mexico because exchange rate pass-through declines after 2001. Consumer prices have become less responsive to exchange rate movements. We further observe a revival (strengthening) of oil price pass-through to domestic inflation in the post- inflation targeting period. |
| first_indexed | 2025-11-15T11:07:50Z |
| format | Article |
| id | upm-60966 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T11:07:50Z |
| publishDate | 2017 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-609662019-05-14T02:55:34Z http://psasir.upm.edu.my/id/eprint/60966/ Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico Baharumshah, Ahmad Zubaidi Fagir Omer, Abdalla Sirag Siew, Voon Soon This paper applies a nonlinear Autoregressive Distribute Lag to examine the exchange rate pass-through into consumer price inflation in Mexico. Overall, the evidence confirmed that ignoring the asymmetric (sign) effect of exchange rate movements on inflation may lead to incorrect inferences and policy conclusions. Exchange rate fluctuation is transferred to prices level more during currency depreciation than appreciation. We compare the macroeconomic performances between pre- and post-inflation targeting, and our findings reaffirmed that the pass-through has weakened significantly after launching inflation targeting in 2001. This result implies that low inflation in the sample period examined is good for Mexico because exchange rate pass-through declines after 2001. Consumer prices have become less responsive to exchange rate movements. We further observe a revival (strengthening) of oil price pass-through to domestic inflation in the post- inflation targeting period. Elsevier 2017 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/60966/1/Asymmetric%20exchange%20rate%20pass-through%20in%20an%20emerging%20market%20economy%20the%20case%20of%20Mexico.pdf Baharumshah, Ahmad Zubaidi and Fagir Omer, Abdalla Sirag and Siew, Voon Soon (2017) Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico. Research in International Business and Finance, 41. 245 - 257. ISSN 0275-5319; ESSN: 1878-3384 https://www.sciencedirect.com/science/article/pii/S0275531917301551 10.1016/j.ribaf.2017.04.034 |
| spellingShingle | Baharumshah, Ahmad Zubaidi Fagir Omer, Abdalla Sirag Siew, Voon Soon Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico |
| title | Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico |
| title_full | Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico |
| title_fullStr | Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico |
| title_full_unstemmed | Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico |
| title_short | Asymmetric exchange rate pass-through in an emerging market economy: the case of Mexico |
| title_sort | asymmetric exchange rate pass-through in an emerging market economy: the case of mexico |
| url | http://psasir.upm.edu.my/id/eprint/60966/ http://psasir.upm.edu.my/id/eprint/60966/ http://psasir.upm.edu.my/id/eprint/60966/ http://psasir.upm.edu.my/id/eprint/60966/1/Asymmetric%20exchange%20rate%20pass-through%20in%20an%20emerging%20market%20economy%20the%20case%20of%20Mexico.pdf |