Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area

The exchange rate pass-through is of considerable importance for policy makers in open economies. Based on work of Johansen (2002) this paper develops the conditions for the identification of equilibrium pass-througheffect in cointegration framework. In addition, I specify the restrictions for testi...

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Main Author:	Igor Masten
Format:	Article
Language:	English
Published:	University of Ljubljana 2017-03-01
Series:	Economic and Business Review
Subjects:	exchange rate pass-through effect identification cointegration analysis
Online Access:	http://www.ebrjournal.net/ojs/index.php/ebr/article/view/402/pdf_68

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spelling	doaj-b14b1743905243f38cc67c6d7f3072812020-11-24T22:26:00ZengUniversity of LjubljanaEconomic and Business Review1580-04662335-42162017-03-0119151810.15458/85451.35Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro areaIgor MastenThe exchange rate pass-through is of considerable importance for policy makers in open economies. Based on work of Johansen (2002) this paper develops the conditions for the identification of equilibrium pass-througheffect in cointegration framework. In addition, I specify the restrictions for testing the perfect equilibrium pass-through. The method is illustrated on the Euro area data and the pass-through effect of the Euro effective exchange rate. The results show that conditional on the type of economic shocks that lead to a permanent change in the exchange rate, the equilibrium pass-through effect can be both very low and high.http://www.ebrjournal.net/ojs/index.php/ebr/article/view/402/pdf_68exchange rate pass-through effectidentificationcointegration analysis
collection	DOAJ
language	English
format	Article
sources	DOAJ
author	Igor Masten
spellingShingle	Igor Masten Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area Economic and Business Review exchange rate pass-through effect identification cointegration analysis
author_facet	Igor Masten
author_sort	Igor Masten
title	Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area
title_short	Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area
title_full	Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area
title_fullStr	Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area
title_full_unstemmed	Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area
title_sort	identification of the equilibrium exchange rate pass-through effect in cointegrated var with an application to the euro area
publisher	University of Ljubljana
series	Economic and Business Review
issn	1580-0466 2335-4216
publishDate	2017-03-01
description	The exchange rate pass-through is of considerable importance for policy makers in open economies. Based on work of Johansen (2002) this paper develops the conditions for the identification of equilibrium pass-througheffect in cointegration framework. In addition, I specify the restrictions for testing the perfect equilibrium pass-through. The method is illustrated on the Euro area data and the pass-through effect of the Euro effective exchange rate. The results show that conditional on the type of economic shocks that lead to a permanent change in the exchange rate, the equilibrium pass-through effect can be both very low and high.
topic	exchange rate pass-through effect identification cointegration analysis
url	http://www.ebrjournal.net/ojs/index.php/ebr/article/view/402/pdf_68
work_keys_str_mv	AT igormasten identificationoftheequilibriumexchangeratepassthrougheffectincointegratedvarwithanapplicationtotheeuroarea
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Identification of the Equilibrium Exchange Rate Pass-Through Effect in Cointegrated VAR with an Application to the Euro area

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