| Summary: | 博士 === 國立政治大學 === 國際經營與貿易研究所 === 100 === This dissertation incorporates inflation and deflation in the analysis of exchange rate pass-through at different price levels. Because the existing literature generally consider deflation as part of low inflation, pass-through estimates tend to be considered the same for these two regimes. This study separates the effects of deflation and low positive inflation and estimates the pass-through for different price levels.
This dissertation uses a nonlinear model with aggregate and disaggregate import prices data from 1981–2008 in Taiwan to first examine the pass-through for two regimes of high inflation and low inflation. The results confirm the notion in the literature that a positive relationship exists between pass-through and inflation. Then, this dissertation extends the model to a three-regime setting, including high inflation, low positive inflation, and deflation. When deflation is clearly defined in a three-regime model, the degree of exchange rate pass-through is found to be increasing in both high inflation and deflation. The positive relationship at all price levels is no longer valid while the effect of deflation is separated from that of low inflation. In Taiwan, the pass-through becomes inversely greater as the inflation rate falls into a deflationary regime. That the pass-through is higher in a deflationary regime became particularly obvious after the 1997 financial crisis. Contrary to the results predicted by the positive relationship, this analysis does not find an unlimited downward trend for the pass-through. A rebound occurs in the degree of pass-through once deflation is clearly identified, and this pattern is also found for half of the importing industries categorized using the Standard International Trade Classification (SITC).
In addition, the results are consistent with the notion that oil prices usually fluctuate much more than the prices of other imports. The estimates show that the pass-through changes the most for fuels and related materials. Obviously, fluctuations in the price of oil influence the measurement of the pass-through. The increase in the pass-through found in a deflationary regime becomes smaller when oil prices are excluded.
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