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

Authors

  • Yasemin Colak Hacettepe University, Department of Economics, Ankara, Turkey
  • Lutfi Erden Hacettepe University, Department of Economics, Ankara, Turkey

DOI:

https://doi.org/10.17811/ebl.10.2.2021.148-156

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

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Published

2021-05-31

How to Cite

Colak, Y., & Erden, L. (2021). Exchange rate pass-through: an analysis of a panel quantile regression. Economics and Business Letters, 10(2), 148-156. https://doi.org/10.17811/ebl.10.2.2021.148-156

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