Exchange rate pass-through and monetary policy in emerging markets: Mexico and South Korea as case study

• Belem Vásquez Galan ^[1] ; Olajide Sunday Oladipo ^[2] ; Leticia Hernández Bielma ^[1]
  1. [1] El Colegio de la Frontera Norte, México
  2. [2] National Institute for Legislative and Democratic Studies, Nigeria
• Localización: Contaduría y administración, ISSN 0186-1042, ISSN-e 2448-8410, Vol. 67, Nº. 1, 2022
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Dialnet Métricas: 1 Cita
• Resumen

  • In the nineties, emerging markets like Mexico and South Korea experienced external shocks that depreciated their domestic currencies and eventually led to overall inflation. The goal in this paper is to estimate long-run and short-run exchange rate pass-through (ERPT) elasticities to consumer and import prices and determine whether monetary policies have reduced the ERPT. Two Vector Error Correction Models were estimated using monthly data from 1995 to 2018. The results show that monetary policies did reduce the ERPT on consumer and import prices in Mexico. In South Korea, the ERPT to import prices was stronger, only when we account for the 1997 financial crisis, the results show that monetary policies contributed to reduce the ERPT to both consumer and import prices.

• Referencias bibliográficas
  • Baharumshah, A., Sirag, A. & Soon, S. V. (2017). Asymmetric exchange rate pass-through in an emerging market economy: The case of Mexico....
  • Campa, J. M. & Goldberg, L. (2002). Exchange Rate Pass-through into Import Prices: A Macro or Micro Phenomenon? NBER Working Paper No....
  • Capistrán, C., Ibarra, R., & Ramos Francia, M. (2012). El traspaso de movimientos del tipo de cambio a los precios. Un análisis para...
  • Cortés, J. (2013) Una estimación del traspaso de las variaciones en el tipo de cambio a los precios en México, El Banco de México, Working...
  • Cuevas, V. M. & Sánchez, A. (2012). El efecto traspaso del tipo de cambio a la producción y los precios en América Latina: un enfoque...
  • Cunningham, A. & A. Haldane (2002). The Monetary Transmission Mechanism in the United Kingdom: Pass-Through and Policy Rules. In N. Loayza...
  • Devereux, M.B., C. Engel & C. Tille (1999). Exchange rate pass-through and the welfare effects of the euro, NBER Working Paper 7382,...
  • Dobrynskaya, V. & Levando, D. (2008). Exchange Rate Pass-Through Effect and Monetary Policy in Russia. In P. Karadeloglou & V. Terraza...
  • Dornbusch, R. (1987). Exchange Rates and Prices. American Economic Review, 77 (1), 93-106. https://doi.org/10.3386/w1769
  • Goldberg, P. K., & Knetter, M. (1997). Goods Prices and Exchange Rates: What Have We Learned? Journal of Economic Literature, 35 (3),...
  • Goldfajn, I. & C. Werlang, S. (2000). The Pass-Through from Depreciation to Inflation: A Panel Study, Working Paper No. 5, Banco Central...
  • Ghosh, A. & Rajan, R. (2009). Exchange rate pass-through in Korea and Thailand: Trends and determinants, Japan and the World Economy...
  • Han, X. & Wei, S. (2018). International transmissions of monetary shocks: Between a trilemma and a dilemma. Journal of International...
  • Hofmann, B. & Takáts, E. (2015). International Monetary Spillovers. BIS Quarterly Review, September, 105–118. https://www.bis.org/publ/qtrpdf/r_qt1509i.htm
  • Jasova, M., Moessner, R. & Takats, E. (2019). Exchange rate pass through: What has changed since the crisis? International Journal of...
  • Kalemli-Ozcan, S., Laeven, L. & Moreno, D. (2019). Debt Overhang, Rollover Risk, and Corporate Investment: Evidence from the European...
  • Kim, K. & Kim, J. (1997). Korean Economic Development: an Overview. In Cha, Dong-Se et al. (Eds), The Korean Economy (pp. 1945-1995),...
  • Koh, Y. (2018). El Crecimiento de la Economía Coreana y el papel del gobierno. In SaKong, Il & Koh, Youngsun (Eds), La economía coreana....
  • Kohlscheen, E. (2011). The Impact of Monetary Policy on the Exchange Rate: puzzling evidence from three emerging economies, Working Paper,...
  • Krugman, P. (1987). Pricing to Market when the Exchange Rate Changes. In Sven W. Arndt, and J. David Richardson, Real-financial linkages...
  • Lafleche, T. (1997). The impact of exchange rate movements on consumer prices. Bank of Canada Review, 1996-1997. Issue Winter, 21-32. Available...
  • Lara, M. (2020). Crecimiento económico: un contraste entre México y Corea del Sur, Tesis de Maestría, Tijuana: El Colegio de la Frontera...
  • Lee, J. (2013). Exchange rate pass-through into export and import prices: A bounds testing analysis on the case of Korea, Working Paper 2013-04,...
  • Lee, J., Yoo, J., Choi, N., et alii. (2018) Política económica internacional. In SaKong, Il & Koh, Youngsun (Eds), La economía coreana....
  • Lee, M. (2005). Asian Financial Crisis and Exchange Rate Pass Through in Korea. International Review of Applied Economics, 1(1), 37-51.
  • Lopez-Villavicencio, A. & Mignon, V. (2016). Exchange Rate Pass-through in Emerging Countries: Do the Inflation Environment, Monetary...
  • Menon, J. (1992). Exchange Rates and Prices of Australian Manufactured Exports. Weltwirtschaftliches Archiv, 128 (4), 695-710. https://doi.org/10.1007/BF02707300
  • Menon, J. (1993). Exchange Rate Pass-Through: Australian Imports of Motor Vehicles. International Economic Journal, 7, 93 – 109. https://doi.org/10.1080/10168739300080023
  • Menon, J. (1995a). Exchange Rate Pass-Through. Journal of Economic Surveys. 9 (2), 197-231. https://doi.org/10.1111/j.1467-6419.1995.tb00114.x
  • Mishkin, F. (2008). Exchange rate pass-through and monetary policy: a speech at the Norges Bank Conference on Monetary Policy. Speech, Board...
  • Moreno, R. (1989). Exchange Rates and Trade Adjustment in Taiwan and Korea. Federal Reserve Bank of San Francisco Economic Review, 2, 30...
  • Ocegueda, J., Torres V., & Manzanares, J. (2011). Tipo de cambio, precios de importación y precios al consumidor: un análisis del efecto...
  • Parsley, D. & Popper, H. (1998). Exchange Rates, Domestic Prices and Central Bank Actions: Recent US Experience. Southern Economic Journal,...
  • Pérez Laurrabaquio, O. (2012). El traspaso del tipo de cambio a los precios: una aproximación al caso de México, Economía, 376. https://doi.org/10.20430/ete.v79i316.77
  • Perron, P. (1989). The great crash, the oil price shock and the unit root hypothesis. Econometrica, 57, 1361-1401.
  • Poghosyan, T. (2020). Exchange Rate Pass-Through in the Caucasus and Central Asia, IMF Working Papers 2020/154, International Monetary Fund.
  • Ramos-Francia, M. & Torres, A. (2005). Reducing Inflation Through Inflation Targeting: The Mexican Experience, Working Paper 2005-1,...
  • Rezitis, A.N. & Brown, A. B. (1999). Pass-Through of Exchange Rates and Tariffs in Greek-U.S. Tobacco Trade. Agricultural Economics,...
  • Rodríguez, J., Hernández, L. & Vásquez, B. (2020). Efecto Pass-through en México en condiciones de alta y baja volatilidad. Revista Mexicana...
  • Shambaugh, J. (2004). The Effect of Fixed Exchange Rates on Monetary Policy. The Quarterly Journal of Economics, 119, (1), 301-352.
  • Siddiqui, R. and Akhtar, N. (1999) The Impact of changes in Exchange Rate on Prices: A case study of Pakistan. Pakistan Development Review,...
  • Taylor, J. (1999). Monetary policy rules. National Bureau of Economic Research. Chicago: University of Chicago Press. https://www.nber.org/chapters/c7412.pdf
  • Taylor, J. (2000). Low Inflation, Pass-through, and the Pricing Power of Firms. European Economic Review. 44, 1389-1408. https://doi.org/10.1016/S0014-2921(00)00037-4
  • Willett, T. & Yongbok, K. (2006). Korea’s Postcrisis Exchange Rate Policy. the Korea Economic Institute. Available at: http://keia.org/sites/default/files/publications/11willetkim.pdf