Bank Of Greece Sa · ATHEX:TELL

Bank Of Greece Sa — Technical Presentation (September 2022)

34 slides from Bank Of Greece Sa's technical presentation, Sep 29, 2022

1. Slide 1: E pluribus plures: Shock dependency of the USD pass-through

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix E pluribus plures Shock dependency of the USD pass-through to real and financial variables Massimo Ferrari Minesso Johannes Gräb European Central Bank European Central Bank Sixth Annual Workshop ES

2. Slide 2: What are the implications of a USD appreciation?

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix What are the implications of a USD appreciation? From the IS-LM model: Y = C + I + G + NX NX = ϕ1 e + ϕ2 Yf − ϕ3 Y with ϕ1 > 0, i.e. Marshall–Lerner condition. Casas et al. (2017) and Boz et al. (20

3. Slide 3: What are the implications of a USD appreciation?

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix What are the implications of a USD appreciation? From the IS-LM model: Y = C + I + G + NX NX = ϕ1 e + ϕ2 Yf − ϕ3 Y with ϕ1 > 0, i.e. Marshall–Lerner condition. Casas et al. (2017) and Boz et al. (20

4. Slide 4: Our contribution

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Our contribution ✓ identify US shocks & compute conditional US exchange rate pass-through to real trade and financial variables 3 / 26

5. Slide 5: Our contribution

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Our contribution ✓ identify US shocks & compute conditional US exchange rate pass-through to real trade and financial variables ✓ document a large heterogeneity across country and shocks: → 33 indiv

6. Slide 6: Our contribution

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Our contribution ✓ identify US shocks & compute conditional US exchange rate pass-through to real trade and financial variables ✓ document a large heterogeneity across country and shocks: → 33 indiv

7. Slide 7: Shock-dependent pass-through estimates

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Shock-dependent pass-through estimates Shock-dependent pass-through estimates Identifying US shocks by means of Bayesian VAR with 4 macro US variables: N Yt = A0 + ∑ Ai Yt−1 + BEt (1) i=1 Table: Sig

8. Slide 8: How to compute conditional PT coefficients?

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix PT coefficients How to compute conditional PT coefficients? Following Forbes et al. (2018) conditional pass-through coefficients are defined as:   ∑K ∂y t+k k=0 ∂ϵx Φy,z (k) =  t  (2) ∑K ∂z t+k

9. Slide 9: Impulse responses—Advance economy (DEU)

   Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Impulse responses—Advance economy (DEU) Figure: Accumulated IRFs for Germany.Notes: response to 1 standard deviation shock. 6 / 26

10. Slide 10: Impulse responses—EME (CHN)

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Impulse responses—EME (CHN) Figure: Accumulated IRFs for China. Notes: response to 1 standard deviation shock. 7 / 26

11. Slide 11: Conditional exchange rate pass-through—Exports

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Conditional exchange rate pass-through—Exports Figure: Country-specific estimates of pass-through to export volumes. Notes: pass-through coefficients are estimated separately for each country and de

12. Slide 12: Taking stock

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Taking stock → the shock matters! Reduced-form estimate differ significantly from conditional coefficients 9 / 26

13. Slide 13: Taking stock

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Taking stock → the shock matters! Reduced-form estimate differ significantly from conditional coefficients → positive PT for real shocks (demand, supply), negative PT for financial shocks (monetary

14. Slide 14: Taking stock

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Taking stock → the shock matters! Reduced-form estimate differ significantly from conditional coefficients → positive PT for real shocks (demand, supply), negative PT for financial shocks (monetary

15. Slide 15: Taking stock

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Taking stock → the shock matters! Reduced-form estimate differ significantly from conditional coefficients → positive PT for real shocks (demand, supply), negative PT for financial shocks (monetary

16. Slide 16: Taking stock

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Taking stock → the shock matters! Reduced-form estimate differ significantly from conditional coefficients → positive PT for real shocks (demand, supply), negative PT for financial shocks (monetary

17. Slide 17: Determinants of exchange rate pass-through – trade

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Determinants of exchange rate pass-through – trade Exports Imports Demand Mon. policy Risk Supply Demand Mon. policy Risk Supply Exp. USD invoicing -0.021*** -0.003 -0.002 -0.022*** (0.00) (0.47) (0

18. Slide 18: DCP and monetary policy shocks (1)

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix DCP and monetary policy shocks (1) Figure: Impulse responses under different monetary policy reaction functions. Notes: Impulse responses from Boz et all. (2020) for different DCP shares and two dif

19. Slide 19: DCP and monetary policy shocks (2)

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix DCP and monetary policy shocks (2) Response of 2-year rate in Germany: Demand shock Supply shock Mon. policy shock Risk shock 12 / 26

20. Slide 20: DCP and monetary policy shocks (2)

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix DCP and monetary policy shocks (2) Response of 2-year rate in Germany: Demand shock Supply shock Mon. policy shock Risk shock Response of 2-year rate in China: Demand shock Supply shock Mon. policy

21. Slide 21: Conclusion

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Conclusion We provide an estimate of shock-dependency and cross-country heterogeneity of US dollar pass-through to trade and financial variables Pass-through is highly shock dependent ▶ Reduced-form

22. Slide 22: Appendix

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Appendix 14 / 26

23. Slide 23: Reduced-form estimates

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Reduced-form estimates Similar to Boz et al. (2020) we estimate the USD pass-through to export and import volumes as: N ∆xt = α + β∆et + ∑ Xt−i Γ + ε t (3) i=1 where: ∆xt is the real export (import)

24. Slide 24: Reduced-form estimates — real exports

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Reduced-form estimates — real exports Figure: Estimates of β for real exports. Notes: white bars indicate insignificant coefficients, black bars indicate country aggregates. 16 / 26

25. Slide 25: Reduced-form estimates — real imports

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Reduced-form estimates — real imports Figure: Estimates of β for real imports. Notes: white bars indicate insignificant coefficients, black bars indicate country aggregates. 17 / 26

26. Slide 26: Shocks statistics

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Shocks statistics Table: Description of US variables and structural shocks QoQ RGDP QoQ 10-year QoQ USD QoQ CPI Mean 0.55 -0.05 0.29 -0.01 Std 1.36 0.35 2.45 0.52 Demand Mon. policy Risk Supply Mean

27. Slide 27: Impulse responses

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Impulse responses Figure: Impulse responses (in percent) of the VAR described by Equation 1. Go back. 19 / 26

28. Slide 28: Historical decomposition—USD NEER

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Historical decomposition—USD NEER Figure: Historical decomposition of the US dollar nominal effective exchange rate. Shocks statistics. Other variables. Impulse responses. Go back. 20 / 26

29. Slide 29: HD – all variables

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix HD – all variables Figure: Historical decomposition – all variables. 21 / 26

30. Slide 30: Computing responses

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Computing responses If S is a shock, the dynamic response to S can be computed as: N Yt = A0 + ∑ Ai Yt−1 + CSt + BEt (4) i=1 because S is the variable of interest, no identification assumptions on B

31. Slide 31: Conditional exchange rate pass-through—Imports

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Conditional exchange rate pass-through—Imports Figure: Country-specific estimates of pass-through to import volumes. Notes: pass-through coefficients are estimated separately for each country and de

32. Slide 32: Conditional exchange rate pass-through—Equity

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Conditional exchange rate pass-through—Equity Figure: Country-specific estimates of the pass-through to equity prices. Notes: pass-through coefficients are estimated separately for each country and

33. Slide 33: Conditional exchange rate pass-through— 10-year yield

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Conditional exchange rate pass-through— 10-year yield Figure: Country-specific estimates of the pass-through to FCIs. Notes: pass-through coefficients are estimated separately for each country and d

34. Slide 34: Determinants of exchange rate pass-through – financial markets

    Introduction Empirical strategy Pass-through results Determinants of pass-through Conclusion Appendix Determinants of exchange rate pass-through – financial markets Equity prices 10-year yields Demand Mon. policy Risk Supply Demand Mon. policy Risk Supply Exp. USD invoicing 0.056* -0.019* -0.007 0.0

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