Discussion Paper

No. 2012-36 | July 25, 2012
Asymmetric Exchange Rate Pass-Through in the Euro Area: New Evidence from Smooth Transition Models

Abstract

This paper examines the presence of asymmetric behavior in exchange rate pass-through (ERPT) to CPI inflation in 12 euro area (EA) countries. Using a class of nonlinear smooth transition models, we test for asymmetry with respect to the direction and the magnitude of exchange rate changes. On the one hand, we find only 5 out of 12 EA countries showing asymmetric pass-through to exchange rate appreciations and depreciations. Results are somewhat mixed with no clear evidence about the direction of asymmetry. On the other hand, we report strong evidence that ERPT responds asymmetrically to the size of exchange rate changes as a result of presence of menu costs. The degree of ERPT is found to be higher for large exchange rate changes than for small ones in 9 out of 12 EA countries.

Data Set

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The data set for this article can be found at: http://hdl.handle.net/1902.1/18603

JEL Classification

C22 F31 F41 E31

Cite As

Nidhaleddine Ben Cheikh (2012). Asymmetric Exchange Rate Pass-Through in the Euro Area: New Evidence from Smooth Transition Models . Economics Discussion Papers, No 2012-36, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-36

Assessment



Comments and Questions


Anonymous - Referee Report 1
August 07, 2012 - 09:31

see attached file


Nidhaleddine Ben Cheikh - Reply to Referee Reports 1
September 17, 2012 - 15:40

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Anonymous - Referee Report 2
September 03, 2012 - 09:06

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Nidhaleddine Ben Cheikh - Reply to Referee Report 2
September 20, 2012 - 23:48

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Anonymous - Referee Report 3
September 13, 2012 - 09:32

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Nidhaleddine Ben Cheikh - Reply to Referee Report 3
September 22, 2012 - 14:40

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Nidhaleddine Ben Cheikh - Revised Version
October 02, 2012 - 15:44

Dear reviewers,
Please find enclosed the revised version of my paper which incorporates the suggestions and recomendations of referees. Thank you again for having taken the time and trouble to read and comment my work.
Kind regards,


Nidhaleddine Ben Cheikh - New Revised Version
October 16, 2012 - 16:34

See attached file