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Dynamic and Long Run Responses of Import Prices to the Exchange Rate in the Asia‐Pacific
Author(s) -
Webber Anthony G.
Publication year - 1999
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/1467-8381.00087
Subject(s) - citation , economics , exchange rate , asia pacific , monetary economics , economy , political science , law
Differentials in the estimate of long run import pass-through is investigated for 9 countries of the Asia-Pacific in conjunction with the estimation of the short run dynamics. This is undertaken using the Johansen procedure, which tests for the possibility of multiple cointegrating vectors and then uses this information to estimate a restricted vector error correction specification. The rank tests indicate that 7 out of the 9 countries had long run cointegrating relationships from which estimates of pass-through could be found. The long run import pass-through responses are significantly diverse, ranging from the perverse case of 109% for Pakistan to 26% for Australia. The short run responses also reveal a relatively slow, albeit statistically significant, adjustment of import prices to alterations in the exchange rate, with most of the adjustment in import prices occurring in the periods after the exchange rate shock.