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

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ÇOLAK Y., ERDEN L.

ECONOMICS AND BUSINESS LETTERS, vol.10, no.2, pp.148-156, 2021 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 10 Issue: 2
  • Publication Date: 2021
  • Doi Number: 10.17811/ebl.10.2.2021.148-156
  • Journal Name: ECONOMICS AND BUSINESS LETTERS
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus, Business Source Elite, Business Source Premier, EconLit, DIALNET
  • Page Numbers: pp.148-156
  • Hacettepe University Affiliated: Yes

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.