ASYMMETRIES IN EXCHANGE RATE PASS-THROUGH IN TURKEY: A THRESHOLD VAR ANALYSIS

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Türel M., ORHAN A.

Prague Economic Papers, cilt.31, sa.3-4, ss.276-295, 2022 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 31 Sayı: 3-4
  • Basım Tarihi: 2022
  • Doi Numarası: 10.18267/j.pep.806
  • Dergi Adı: Prague Economic Papers
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, Periodicals Index Online, EconLit, PAIS International, Political Science Complete, Worldwide Political Science Abstracts
  • Sayfa Sayıları: ss.276-295
  • Anahtar Kelimeler: Exchange rate, pass-through, inflation rate, threshold VAR, THROUGH EVIDENCE, TIME-SERIES, UNIT-ROOT, PRICES, INFLATION, ECONOMY, REGIMES
  • Kocaeli Üniversitesi Adresli: Evet

Özet

© 2022, University of Economics - Prague. All rights reserved.This paper analyses the asymmetric behaviour of exchange rate pass-through in Turkey using a threshold VAR model. The main purpose is to examine the asymmetries in the exchange rate pass-through based on size, direction and inflationary environment of an emerging market economy with a highly depreciated domestic currency and two-digit inflation rate. Monthly exchange rate movements and monthly inflation rates were used as threshold variables. Nonlinear impulse response functions were employed to compare upper and lower regimes. According to our findings, the transmission of exchange rate shocks to domestic inflation in the upper regime is stronger than that in the lower regime. The pass-through increases with the magnitude of shocks. Besides, positive shocks have more effect on domestic prices than negative shocks, especially in the upper regime. A positive relationship between inflation and exchange rate pass-through exists. During high inflation periods, pass-through to domestic prices increases.