Markov-switching analysis of exchange rate pass-through: perspective from Asian countries
This study presents a nonlinear pass-through from the exchange rate to domestic prices drawn from a dataset of six Asian countries. Using the Markov-switching model, it is found that there are two regimes. The extent of the pass-through is incomplete and is found to be significantly lower in stable...
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2017
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| Online Access: | http://psasir.upm.edu.my/id/eprint/62356/ http://psasir.upm.edu.my/id/eprint/62356/1/Markov-switching%20analysis%20of%20exchange%20rate%20pass-through.pdf |
| _version_ | 1848854613613084672 |
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| author | Baharumshah, Ahmad Zubaidi Soon, Siew Voon Wohar, Mark E. |
| author_facet | Baharumshah, Ahmad Zubaidi Soon, Siew Voon Wohar, Mark E. |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This study presents a nonlinear pass-through from the exchange rate to domestic prices drawn from a dataset of six Asian countries. Using the Markov-switching model, it is found that there are two regimes. The extent of the pass-through is incomplete and is found to be significantly lower in stable regime states. Domestic prices are sensitive to external factors when inflation uncertainty is higher. Essentially, the pass-through estimates exhibit some variation across countries and regimes. Central banks are credible, but the exchange rate is ineffective as a shock absorber during the unstable regime. We find that the output gap has more influence on inflation when the level of inflation exhibits large and erratic variations. Policymakers need to pay attention during periods of high inflation because consumer prices respond differently when the economy is in a high compared to a low inflation regime. |
| first_indexed | 2025-11-15T11:12:39Z |
| format | Article |
| id | upm-62356 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T11:12:39Z |
| publishDate | 2017 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-623562020-01-08T01:22:24Z http://psasir.upm.edu.my/id/eprint/62356/ Markov-switching analysis of exchange rate pass-through: perspective from Asian countries Baharumshah, Ahmad Zubaidi Soon, Siew Voon Wohar, Mark E. This study presents a nonlinear pass-through from the exchange rate to domestic prices drawn from a dataset of six Asian countries. Using the Markov-switching model, it is found that there are two regimes. The extent of the pass-through is incomplete and is found to be significantly lower in stable regime states. Domestic prices are sensitive to external factors when inflation uncertainty is higher. Essentially, the pass-through estimates exhibit some variation across countries and regimes. Central banks are credible, but the exchange rate is ineffective as a shock absorber during the unstable regime. We find that the output gap has more influence on inflation when the level of inflation exhibits large and erratic variations. Policymakers need to pay attention during periods of high inflation because consumer prices respond differently when the economy is in a high compared to a low inflation regime. Elsevier 2017-09 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/62356/1/Markov-switching%20analysis%20of%20exchange%20rate%20pass-through.pdf Baharumshah, Ahmad Zubaidi and Soon, Siew Voon and Wohar, Mark E. (2017) Markov-switching analysis of exchange rate pass-through: perspective from Asian countries. International Review of Economics & Finance, 51. 245 - 257. ISSN 1059-0560; ESSN: 1873-8036 https://www.sciencedirect.com/science/article/pii/S1059056017304185#! 10.1016/j.iref.2017.05.009 |
| spellingShingle | Baharumshah, Ahmad Zubaidi Soon, Siew Voon Wohar, Mark E. Markov-switching analysis of exchange rate pass-through: perspective from Asian countries |
| title | Markov-switching analysis of exchange rate pass-through: perspective from Asian countries |
| title_full | Markov-switching analysis of exchange rate pass-through: perspective from Asian countries |
| title_fullStr | Markov-switching analysis of exchange rate pass-through: perspective from Asian countries |
| title_full_unstemmed | Markov-switching analysis of exchange rate pass-through: perspective from Asian countries |
| title_short | Markov-switching analysis of exchange rate pass-through: perspective from Asian countries |
| title_sort | markov-switching analysis of exchange rate pass-through: perspective from asian countries |
| url | http://psasir.upm.edu.my/id/eprint/62356/ http://psasir.upm.edu.my/id/eprint/62356/ http://psasir.upm.edu.my/id/eprint/62356/ http://psasir.upm.edu.my/id/eprint/62356/1/Markov-switching%20analysis%20of%20exchange%20rate%20pass-through.pdf |