چکیده:
The main objective of this paper is to investigate the effects of monetary regime (countries with inflation targeting monetary policy versus countries with exchange rate anchor) on the extent of exchange rate pass-through over the period of 1999-2010. To achieve this objective, the econometric model has been estimated by Dynamic Panel Data approach and Arrelano- Bond (AB) method. The empirical findings indicate that the interaction effect of monetary regime with exchange rate has a negative and positive impact on the exchange rate pass-through in first and second groups of countries respectively. However, the cross effect of inflationary environment with nominal effective exchange rate has negative and significant effect on domestic price level in the both groups of countries. Hence, overall, the Taylor hypothesis has been confirmed.
خلاصه ماشینی:
"Empirical evidence by Taylor (2000), Choudhri and Hakura (2001), Gagnon and Ihrig (2001), Bailliu and Fujii (2004), Barhoumi (2005), Karoro (2007), Sowah (2009), Coulibaly and Kempf (2010) and Winkelreid (2011) indicates those countries which followed inflation targeting monetary regime have experienced a decline in exchange rate pass-through.
The results of this paper indicate that money supply as a proxy for monetary policy has a positive and significant effect on domestic price in these countries and exchange rate pass-through has declined by adapting the inflation targeting monetary regime.
In order to examine the responsiveness of domestic price to the exchange rate pass-through in presence of the monetary regime and inflationary environment in selected countries, the defacto exchange rate classification and dynamic panel data approach have been used over the period of 1999-2010.
3. Model Specification and Data Sources In order to evaluate the effects of monetary regime and inflationary environment on domestic price in the countries with exchange rate anchor versus inflation targeting monetary regime, according to the economic literatures as well as empirical studies by Sowah (2009), Nogueira et al (2010) and Ivohasina (2012), the following dynamic model in terms of logarithm has been specified: (1) In the above equation, CPI is consumer price index; represent the first lag of consumer price index as a proxy for inflation persistence; is nominal effective exchange rate.
To investigate the joint effects of the monetary regime and inflationary environment on the domestic prices in the both groups of countries, the empirical model has been estimated by dynamic panel data approach."