Open AccessExchange rate pass-through: an analysis of a panel quantile regression
Author(s) -
Yasemin Çolak,
Lütfi Erden
Publication year - 2021
Publication title -
economics and business letters
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.197
H-Index - 4
ISSN - 2254-4380
DOI - 10.17811/ebl.10.2.2021.148-156
Subject(s) - quantile regression , quantile , econometrics , exchange rate pass through , inflation (cosmology) , panel data , economics , exchange rate , regression , statistics , mathematics , monetary economics , physics , theoretical physics
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 RegressionJEL Codes: C13, E31, F31