Phillips curve for the Asian economies: A nonlinear perspective

Baharumshah, Ahmad Zubaidi and Soon, Siew Voon and Wohar, Mark E. (2021) Phillips curve for the Asian economies: A nonlinear perspective. Emerging Markets Finance and Trade, 57 (12). pp. 3508-3537. ISSN 1540-496X, DOI

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This paper examines the impact of exchange-rate movements on inflation in eight Asian countries. Results from an open-economy Phillips curve are; first, the Markov-switching open-economy model confirm that the two-state Phillips curve outperforms alternative models to study inflation dynamics. There is considerable heterogeneity in the pass-through estimates for Asian countries, with Singapore exhibiting the lowest exchange rate pass-through (ERPT). Regime-dependent pass-through estimates are sensitive to average inflation and it should be factored in when forecasting inflation rates. Second, the extent of pass-through is considerably lower and far from complete in a low-inflation regime, endorsing Taylor hypothesis. Third, in the majority of the countries, we find support for global disinflation in domestic inflation that has strengthened over time. The main takeaway is that globalization matters for Asian inflation dynamics.

Item Type: Article
Funders: Universiti Putra Malaysia (GP-IPB/2014/9440900)
Uncontrolled Keywords: Exchange rate pass-through; Asymmetry; Fear of floating phenomenon; Globalization; Phillips curve
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HF Commerce > Business
Divisions: Faculty of Business and Economics > Department of Economics and Applied Statistics
Depositing User: Ms Zaharah Ramly
Date Deposited: 31 May 2022 03:12
Last Modified: 31 May 2022 03:12

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