Modeling foreign exchange rate pass-through using the exponential GARCH

Baoying Lai, Nathan Lael Joseph

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

In this chapter, the authors use an EGARCH-ECM to estimate the pass-through effects of Foreign Exchange (FX) rate changes and changes in producers' prices for 20 U.K. export sectors. The long-run adjustments of export prices to FX rate changes and changes in producers' prices are within the range of -1.02% (for the Textiles sector) and -17.22% (for the Meat sector). The contemporaneous Pricing-To-Market (PTM) coefficients are within the range of -72.84% (for the Fuels sector) and -8.05% (for the Textiles sector). Short-run FX rate pass-through is not complete even after several months. Rolling EGARCH-ECMs show that the short and long-run effects of changes in FX rate and producers' prices vary substantially, as do asymmetry and volatility estimates before equilibrium is achieved.
Original languageEnglish
Title of host publicationAnalytical Approaches to Strategic Decision-Making: Interdisciplinary Considerations
EditorsMadjid Tavana
PublisherIGI Global
Chapter8
Pages139-190
Number of pages52
ISBN (Electronic)9781466659599
ISBN (Print)9781466659582
DOIs
Publication statusPublished - 30 Apr 2014
Externally publishedYes

Publication series

NameAnalytical Approaches to Strategic Decision-Making: Interdisciplinary Considerations

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  • Cite this

    Lai, B., & Joseph, N. L. (2014). Modeling foreign exchange rate pass-through using the exponential GARCH. In M. Tavana (Ed.), Analytical Approaches to Strategic Decision-Making: Interdisciplinary Considerations (pp. 139-190). (Analytical Approaches to Strategic Decision-Making: Interdisciplinary Considerations). IGI Global. https://doi.org/10.4018/978-1-4666-5958-2.ch008