EXCHANGE RATE PASS-THROUGH TO DOMESTIC PRICE INDICES IN THAILAND

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Santi Termprasertsakul

Abstract

Understanding the exchange rate pass-through is an important implication for all central banks in open economies such as Thailand as it helps policy makers forecast inflation and decide how much to tighten monetary policy regarding to an inflation increasing. This paper investigates the degree of exchange rate pass-through in Thailand, using the new framework called the nonlinear autoregressive distributed lags (NARDL) introduced by Shin et al. (2013). The advantage of this model is to simultaneously accommodate asymmetry in both the long-run and short-run pass-through. The results reveal the zero pass-through to the Consumer Price Index (CPI) and Producer Price Index (PPI) in the long-run, implying that Thai Baht depreciation (or appreciation) does not affect any domestic prices in Thailand in the long-run. However, the partial pass-through to CPI and PPI exists in the short-run. Also, the results strongly confirm the asymmetric pass-through in the short-run which an appreciation of Thai Baht is passed-through more strongly than a depreciation of Thai Baht.

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บทความวิจัย (Research Article)

References

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