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The Impact of Inflationary Environment on Exchange Rate Pass- Through on Import Prices in Iran: Markov–Switching Approach
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Abstract: (6466 Views) |
| The main objective of this paper is to investigate the impact of inflationary environment on degree of exchange rate pass through in Iran over the period 1975-2009.For this purpose, first high and low inflationary regimes have been derived using the Markov–Switching model and then, the impact of inflationary environments on exchange rate pass through to import prices have been estimate using Johansen-Juselius co integration technique. The empirical findings indicate a slight shift between the exchange rate and import price index and inflationary environments impact on the degree of pass rate on import prices in an asymmetric way, so that the exchange rate pass- through to import price index in high inflation levels is more than in low levels. Also, the results show the marginal cost of the variable partners have a positive and significant impact on the economy, while variable degrees of openness have a significant negative impact on the import prices. |
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| Keywords: Degree of Exchange Rates Pass Through, The Inflationary Environments, The Markov-Switching Models, Johansen-Juselius Co Integration Test, Import Prices. |
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Type of Study: Applicable |
Subject:
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