Time-lag of foreign exchange payment, Openness, and exchange rate pass-through: Analysis based on DSGE model
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| Title | Time-lag of foreign exchange payment, Openness, and exchange rate pass-through: Analysis based on DSGE model
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| Author | Guichuan Deng and Danyang Xie |
| Organization | School of Economics and Management, Wuhan University |
| Email | dgc1204@126.com；dgc1204@126.com |
| Key Words | Time-lag of Foreign Exchange Payment; Openness; Exchange Rate Pass-through; DSGE |
| Abstract | Considering the time-lag of foreign exchange payment under the specification of local currency pricing(LCP), the paper constructs a two-countries DSGE model to analyze the impact of time-lag of foreign exchange payment and openness on pass-through of exchange rate. Theoretical analysis and simulation results show that: (1) after introducing time-lag of foreign exchange payment, exchange rate can affect the produce price, export and import price and consumption price by not only real marginal cost under the bench model but also the interest rate and expectation of exchange rate. (2) time-lag of foreign exchange payment will improve the explanatory ability for it decreases the degree of pass-through of exchange rate. (3)the openness can affect not only the degree of exchange rate pass-through, but also the direction of exchange rate pass-through. |
| Serial Number | WP1205 |
| Time | 2017-07-04 |
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