Exchange Rate Pass-Through in Russia

Testing the asymmetric effects of exchange rate pass‐through in BRICS countries: Does the state of the economy matter?

“…This inherent heterogeneity in the responses suggests an asymmetric pass-through with respect to state of the economy such as the recession versus expansion and to small and large exchange rate shocks in all the countries under investigation. Therefore, our finding is consistent with Pollard and Coughlin (2004) who identify that the pass-through of exchange rate in the US industries is dependent on the size of the shock to exchange rate. Our finding also corroborates with Delatte and Lopez-Villavicencio (2012) who find asymmetric exchange rate in four major countries in Europe.…”

“…However, the fact that the adjustment speed estimates are distantly higher than zero in all the countries suggests the existence of the low cost of price adjustment, which encourages firms to easily adjust their prices to small and large changes in exchange rate. This result is contrary to the theoretical conjecture described in Pollard and Coughlin (2004) that a small shock to exchange rate is likely to be absorbed within the firms' markup margins because of the high cost of price adjustment (menu cost). Overall, the possibility of adjusting prices to a small and large shock to exchange rate is higher in Brazil, followed by in South Africa, India, China and Russia when the regime switching is governed by NEER.…”

“…Similarly, a study by Jooste and Jhaveri (2014) suggests that a decline in the pass-through in South Africa is attributed to a low and stable inflation environment. These findings in South Africa are congenial with Baharumshah Sirag and Soon (2017), , Ben Cheikh and Lonhichi (2016), Jiménez-Rodríguez and Morales-Zumaquero (2016), Junttila and Korhonen (2012), Kilic (2016), Pollard and Coughlin (2004), Shintani, Terada-Hagiwara, and Tomoyoshi (2013) and Soon et al (2018). In China, Apergis (2015) finds asymmetric evidence of the ERPT to poverty with the period of depreciation of the Chinese currency having a stronger pass-through impact than when Chinese currency appreciates.…”

“…More so, suppose that the import prices of the domestic firms are set in the currency of an exporting firm, a small change in exchange rate may not change the price received by the domestic firms but affect completely the home currency price of good; hence, ERPT is complete. Although, if the import prices are set in the currency of an importing firm, the pass-through will tend to be higher when the size of the exchange rate change is somewhat large than when the size of the exchange rate shock is somewhat small (see Baldwin, 1988;Dornbusch, 1987;Pollard & Coughlin, 2004). On the contrary, if the change in exchange rate is large, the price received by the domestic firms may be adjusted by passing a small fraction of the change to its prices and this subsequently leads to a fall in ERPT.…”

Exchange Rate Pass-Through Investigation for Turkish Economy

“…Ponomarev et al [18] found that the reflection is between 5 and 15% and decreases with time in their VAR analysis for Russia with the data of 2000-2012.…”