Asymmetry in the exchange rate pass-through to consumer prices in Eastern European countries

Viktor Shevchuk; Roman Kopych

doi:https://doi.org/10.59139/ps.2023.03.1

Viktor Shevchuk Cracow University of Technology, Council of Social Sciences, ul. Warszawska 10, 31-155 Cracow ORCID:https://orcid.org/0000-0002-7125-1267 , Roman Kopych Lviv University of Trade and Economics, Department of International Economic Relations and Computer Sciences, 79005, m. L’viv, vul. Br. Tershakivtsiv, 2a, kim. 314, 315, Ukraine ORCID:https://orcid.org/0000-0002-3986-7694 Przegląd Statystyczny. Statistical Review, vol. 70, 2023, 3, pages: 1-17 Published online: 29 March 2024 DOI https://doi.org/10.59139/ps.2023.03.1 Citation: Shevchuk, V., & Kopych, R. (2023). Asymmetry in the exchange rate pass-through to consumer prices in Eastern European countries. Przegląd Statystyczny. Statistical Review, 70(3), 1–17. https://doi.org/10.59139/ps.2023.03.1.

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ARTICLE

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ABSTRACT

Using quarterly data from Q1 2002 to Q4 2021, a Nonlinear Autoregressive Distributed Lag (NARDL) model is utilised to investigate the potential asymmetry in the exchange rate pass-through (ERPT) to consumer prices in 11 Eastern European countries. The findings show that both the appreciations and depreciations of the nominal effective exchange rate (NEER) have significant long-term effects on consumer prices, with the appreciations being stronger in countries with a fixed exchange rate regime, especially the Baltic States. Incomplete long-term ERPT is observed in the majority of countries, except Estonia. Short-term ERPT is much weaker and often of an opposite direction for appreciations and depreciations. Additionally, a strong uniform long-term effect of both the money supply and crude oil prices was observed, while the short-term effects are mixed. As regards economic liberalisation, both long- and short-term effects are country-specific and of a different direction.

KEYWORDS

exchange rate pass-through, asymmetry, consumer prices, nonlinear ARDL model

JEL

C22, E31, E37

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