Kassi, D.F.; Rathnayake, D.N.; Edjoukou, A.J.R.; Gnangoin, Y.T.; Louembe, P.A.; Ding, N.; Sun, G. Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries. Economies 2019, 7, 5.
Kassi, D.F.; Rathnayake, D.N.; Edjoukou, A.J.R.; Gnangoin, Y.T.; Louembe, P.A.; Ding, N.; Sun, G. Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries. Economies 2019, 7, 5.
Abstract
This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 Sub-Saharan African (SSA) countries from 1990q1 to 2017q4. The exchange rate pass-through (ERPT) to consumer prices is estimated for each country by using the nonlinear autoregressive distributed lags (NARDL) framework and dynamic panel estimators robust to cross-sectionally correlated errors. Firstly, our findings suggest an asymmetrical ERPT in the SSA region during the short-term, whereas there are mixed results across sub-regions in the long-term. Next, we find incomplete and significant ERPT to consumer prices in the entire SSA region which is higher during the depreciation of the local currency than after appreciations. Third, we find nonlinear ERPT with respect to the size of the exchange rate. The pass-through is higher during large exchange rate changes than after small changes. Finally, we find that the pass-through is greater in the countries with fixed exchange rate regime (CFA franc zone) having low inflationary environment than in the other SSA countries with flexible exchange rate regime and high inflation levels. As a result, policymakers should take into account these asymmetries and non-linearities to improve the credibility of monetary policy, strengthen trade liberalization and establish competitive market structures in the Sub-Saharan region.
Keywords
asymmetry; exchange rate pass-through; NARDL; inflation; sub-Saharan Africa
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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Commenter:
The commenter has declared there is no conflict of interests.
Thank you for your interest in reading our paper. You may find the peer reviewed version (published) at the following links:
https://www.researchgate.net/publication/330324207_Asymmetry_in_Exchange_Rate_Pass-Through_to_Consumer_Prices_New_Perspective_from_Sub-Saharan_African_Countries?_sg=ba06wUIoLJuwoFIS0IayZ9aXOE6y0YGKWZ1byiDpudua1FTZ3b7tpo4qvsC0zYKbhP4KEoaB3WJj4d4P4RS4F06ytwYbjYZGvFnfNKGU.5rh7JLNrk6SlUPfdO02gwgbhZLNF5CLeZMyVIZ_7kxUt6CFmMIOmD7ZzfPlSQVLpT-4GM7Kw0FcEcq_ZxiB7EA
https://www.mdpi.com/2227-7099/7/1/5
Best regards!
Corresponding author:
Kassi
PhD Scholar in Finance
Dongbei University of Finance and Economics,
Dalian, China PR