Title: Shock dependence of exchange rate pass-through: A comparative analysis of BVARs and DSGEs
Authors: Mariarosaria Comunale - Bank of Lithuania (Lithuania) [presenting]
Abstract: Results from Structural Bayesian VARs coming from several studies for the euro area are collected which apply the idea of a shock-dependent Exchange Rate Pass-Through, drawing a comparison across models and also with respect to available DSGEs. On impact the results are similar across Structural Bayesian VARs. It is, however, very hard to find a robust characterization across models and the modelling challenges increase when looking at individual countries. Hence, we provide a local projection exercise with common euro area shocks, identified in euro area-specific Structural Bayesian VARs, extrapolated and used as regressors. For common exchange rate shocks, the impact on consumer prices is the largest in some new member states, but there are a wide range of estimates across models. Generally euro area monetary policy plays a bigger role for consumer prices. The very low values in core consumer prices can be mostly attributed to the price of services. In BVARs especially, all shocks contribute relatively little to observed changes in the exchange rate and in HICP, pointing to a key role of the contribution of systematic factors, not captured by the historical shock decomposition.