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Open Economies Review

, Volume 26, Issue 5, pp 893–909 | Cite as

The Endogeneity of Exchange Rate Pass-Through: Some European Evidence

  • Ayako Saiki
Research Article
  • 346 Downloads

Abstract

The decline in exchange rate pass-through (ERPT) in the last three decades is well-documented in the literature. Various studies seek explanations, among which is higher monetary policy credibility. ERPT is often treated as exogenous (i.e., fix coefficient) in policy-makers’ and market participants’ forecasting models. However, if the ERPT is endogenous to monetary policy, it can lead to an error in inflation forecasts and inaccurate policy reaction. Against this backdrop, this paper seeks to examine the endogeneity of exchange rate pass-through to monetary policy, using the European countries as the sample.

Keywords

Monetary policy Inflation Exchange rate Pass-through GMM 

JEL Classification

E52 E31 F31 F41 C23 C26 

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Department of Economic Policy and Research (EBO)De Nederlandsche Bank, DNB-EBOAmsterdamThe Netherlands

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