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


ÇOLAK Y. , ERDEN L.

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

  • Publication Type: Article / Article
  • Volume: 10 Issue: 2
  • Publication Date: 2021
  • Doi Number: 10.17811/ebl.10.2.2021.148-156
  • Title of Journal : ECONOMICS AND BUSINESS LETTERS
  • Page Numbers: pp.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.