Modeling Foreign Exchange Rate Pass-Through Using the Exponential GARCH

Book chapter


Lai, A. and Joseph, Nathan Lael 2014. Modeling Foreign Exchange Rate Pass-Through Using the Exponential GARCH. in: Analytical Approaches to Strategic Decision-Making: Interdisciplinary Considerations IGI Global. pp. 139-190
AuthorsLai, A. and Joseph, Nathan Lael
Abstract

In this chapter, the authors use an EGARCH-ECM to estimate the pass-through effects of Foreign
Exchange (FX) rate changes and changes in producers’ prices for 20 U.K. export sectors. The long-run
adjustments of export prices to FX rate changes and changes in producers’ prices are within the range
of –1.02% (for the Textiles sector) and –17.22% (for the Meat sector). The contemporaneous Pricing-
To-Market (PTM) coefficients are within the range of –72.84% (for the Fuels sector) and –8.05% (for
the Textiles sector). Short-run FX rate pass-through is not complete even after several months. Rolling
EGARCH-ECMs show that the short and long-run effects of changes in FX rate and producers’ prices
vary substantially, as do asymmetry and volatility estimates before equilibrium is achieved.

Book titleAnalytical Approaches to Strategic Decision-Making: Interdisciplinary Considerations
Page range139-190
Year2014
PublisherIGI Global
Publication dates
Print01 Apr 2014
Publication process dates
Deposited12 Jan 2018
ISBN9781466659582
Web address (URL)https://www.doi.org/10.4018/978-1-4666-5958-2.ch008
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