Exchange Rate Pass-Through Over the Business Cycle in Singapore
IMF Working Papers, June 1, 2011
Source details
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- Exchange Rate Pass-Through Over the Business Cycle in Singapore
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Bibliographic details
- Authors: Siang Meng Tan, Joey Chew, Sam Ouliaris
- Published: June 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455266425.001
Summary and main findings
- The paper investigates exchange rate pass-through in Singapore using band-pass spectral regression techniques, allowing for asymmetric effects over the business cycle.
- First stage pass-through is estimated to be complete and relatively quick, confirming that the exchange rate provides an effective tool to moderate imported inflation in Singapore.
- Asymmetric pass-through effects over the business cycle are detected:
- Importers pass on a smaller share of exchange rate movements during boom periods as compared to recessions.
- The results suggest that Singapore’s exchange rate policy could afford to "lean against the wind," especially during cyclical expansions.
Methodology
- Estimation technique: band-pass spectral regression techniques.
- Focus: asymmetric effects over the business cycle and stage pass-through (first stage pass-through emphasized).
Policy implications and recommendations
- Exchange rate movements can be an effective tool to moderate imported inflation in Singapore given the relatively complete and quick first stage pass-through.
- Because pass-through is smaller during boom periods than during recessions, Singapore’s exchange rate policy could "lean against the wind" particularly during cyclical expansions.
Subject coverage and keywords
- Subject areas: Business cycles, Consumer price indexes, Economic growth, Exchange rate pass-through, Exchange rates, Foreign exchange, Import prices, Prices.
- Keywords: Business cycles, Consumer price indexes, Exchange Rate Pass-Through, Exchange rates, Global, import price pass-through, import prices, inflation, nominal exchange rate, pass-through effect, pass-through elasticity, pass-through literature, Singapore, stage pass-through, WP.