Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE Approach
The main goal of this paper is to analyze the exchange rate pass-through, the relationship between exchange rate and prices, provided that a shock occurs and changes exchange rate and prices. The key point in this study is that exchange rate is considered as an endogenous variable. This issue is imp...
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| Format: | Article |
| Language: | fas |
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Tarbiat Modares University
2018-07-01
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| Series: | پژوهشهای اقتصادی |
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| Online Access: | http://ecor.modares.ac.ir/article-18-14800-en.pdf |
| _version_ | 1827924988084092928 |
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| author | Matin Sadat Borghei Teimoor Mohammadi |
| author_facet | Matin Sadat Borghei Teimoor Mohammadi |
| author_sort | Matin Sadat Borghei |
| collection | DOAJ |
| description | The main goal of this paper is to analyze the exchange rate pass-through, the relationship between exchange rate and prices, provided that a shock occurs and changes exchange rate and prices. The key point in this study is that exchange rate is considered as an endogenous variable. This issue is important because exchange rate pass-through due to specific shocks differs from case to case. Hence a dynamic stochastic general equilibrium model is presented and simulated for Iran. The accuracy of the model is analyzed by comparing the moments of the model and the moments of the quarterly data from 1988 to 2010. Then, exchange rate pass-through conditional on each shock (technology, oil revenue, foreign output, and demand for money, foreign interest rate and monetary policy shocks) is calculated by the ratio of covariance of the impulse response of price and exchange rate to variance of the impulse response of exchange rate. Finally, aggregate exchange rate pass-through is computed as the sum of conditional pass-through coefficients in each time weighted by the contribution of each shock. The biggest exchange rate pass-through to consumer prices belongs to oil revenue and foreign output shocks which amounts to about 1, and the smallest one is related to technology shock. |
| first_indexed | 2024-03-13T05:18:45Z |
| format | Article |
| id | doaj.art-f8e624a137c545e298b8f6d36ab20269 |
| institution | Directory Open Access Journal |
| issn | 1735-6768 2980-7832 |
| language | fas |
| last_indexed | 2024-03-13T05:18:45Z |
| publishDate | 2018-07-01 |
| publisher | Tarbiat Modares University |
| record_format | Article |
| series | پژوهشهای اقتصادی |
| spelling | doaj.art-f8e624a137c545e298b8f6d36ab202692023-06-15T20:23:04ZfasTarbiat Modares Universityپژوهشهای اقتصادی1735-67682980-78322018-07-011822148Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE ApproachMatin Sadat Borghei0Teimoor Mohammadi1 Ph.D. of Economics, Allameh Tabataba’i University Associate Professor of Economics, Allameh Tabataba’i University The main goal of this paper is to analyze the exchange rate pass-through, the relationship between exchange rate and prices, provided that a shock occurs and changes exchange rate and prices. The key point in this study is that exchange rate is considered as an endogenous variable. This issue is important because exchange rate pass-through due to specific shocks differs from case to case. Hence a dynamic stochastic general equilibrium model is presented and simulated for Iran. The accuracy of the model is analyzed by comparing the moments of the model and the moments of the quarterly data from 1988 to 2010. Then, exchange rate pass-through conditional on each shock (technology, oil revenue, foreign output, and demand for money, foreign interest rate and monetary policy shocks) is calculated by the ratio of covariance of the impulse response of price and exchange rate to variance of the impulse response of exchange rate. Finally, aggregate exchange rate pass-through is computed as the sum of conditional pass-through coefficients in each time weighted by the contribution of each shock. The biggest exchange rate pass-through to consumer prices belongs to oil revenue and foreign output shocks which amounts to about 1, and the smallest one is related to technology shock.http://ecor.modares.ac.ir/article-18-14800-en.pdfexchange rate pass-throughconsumer price indexdynamic stochastic general equilibrium model |
| spellingShingle | Matin Sadat Borghei Teimoor Mohammadi Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE Approach پژوهشهای اقتصادی exchange rate pass-through consumer price index dynamic stochastic general equilibrium model |
| title | Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE Approach |
| title_full | Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE Approach |
| title_fullStr | Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE Approach |
| title_full_unstemmed | Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE Approach |
| title_short | Conditional Exchange Rate Pass-Through to Consumer Prices in Iran: A DSGE Approach |
| title_sort | conditional exchange rate pass through to consumer prices in iran a dsge approach |
| topic | exchange rate pass-through consumer price index dynamic stochastic general equilibrium model |
| url | http://ecor.modares.ac.ir/article-18-14800-en.pdf |
| work_keys_str_mv | AT matinsadatborghei conditionalexchangeratepassthroughtoconsumerpricesiniranadsgeapproach AT teimoormohammadi conditionalexchangeratepassthroughtoconsumerpricesiniranadsgeapproach |