Can inaction account for the incomplete exchange rate pass-through? Evidence from threshold ARDL model

Figures & data

Table 1. Sectoral characteristics.

Manufacture of:	NACE code	Technologic intensity	Sales in non-domestic markets as percent of total industry	Sales in non-domestic markets as percent of total sales	Import intensity of production
food	C10	L	10.0%	24.4%	15.9%
beverages	C11	L	0.4%	8.4%
textiles	C13	L	1.4%	50.0%	36.6%
wearing apparel	C14	L	0.7%	34.6%
leather and related products	C15	L	0.5%	48.1%
wood, cork, straw and wicker products	C16	L	2.3%	29.6%	15.5%
paper and paper products	C17	L	2.8%	34.8%	26.5%
printing and reproduction	C18	L	0.6%	20.1%	26.5%
coke and refined petroleum products	C19	L	3.2%	23.3%	58.1%
chemicals and chemical products	C20	H	5.2%	39.6%	36.6%
pharmaceutical products	C21	H	1.4%	46.0%	36.6%
rubber and plastic products	C22	M	7.5%	44.1%	37.1%
other non-metallic mineral products	C23	M	2.8%	26.5%	20.2%
basic metals	C24	M	4.6%	46.3%	28.3%
metal products	C25	L	7.4%	36.5%	34.6%
computer, electronic and optical products	C26	H	5.4%	69.1%	49.0%
electrical equipment	C27	H	7.8%	67.4%	46.1%
machinery and equipment n.e.c.	C28	H	4.0%	42.0%	41.7%
motor vehicles, trailers and semi-trailers	C29	H	22.4%	79.9%	38.3%
other transport equipment	C30	H	3.0%	68.1%	51.8%
furniture	C31	L	5.2%	59.1%	28.7%
other products	C32	M	1.2%	47.1%

Notes: Data come from Polish Statistical Office and OECD and are for the year 2015. Technologic intensity is assigned according to UNIDO classification, where L stands for low technology, M for medium technology and H for medium-high or high technology. Import intensity of production is defined as a share of imported inputs in intermediate consumption.

Table 2. Unit root tests.

Manufacture of:	Prices		Costs		Demand
	H0: I(1)	H0: I(2)	H0: I(1)	H0: I(2)	H0: I(1)	H0: I(2)
food	−2.76*	−10.05***	−1.68	−6.77***	−2.68	−15.01***
beverages	−1.89	−11.79***	−2.34	−12.84***	−3.51**	−12.71***
textiles	−2.46	−9.93***	−1.49	−11.71***	−2.06	−4.38***
wearing apparel	−1.84	−10.90***	−0.79	−11.77***	−1.73	−12.59***
leather and related products	−1.74	−11.38***	0.12	−10.94***	−2.31	−12.40***
wood, cork, straw and wicker products	−2.04	−8.97***	−1.38	−4.73***	−0.77	−12.85***
paper and paper products	−2.12	−12.59***	−0.66	−10.05***	−1.81	−5.29***
printing and reproduction	−1.45	−7.25***	−0.81	−14.47***	−1.67	−16.47***
coke and refined petroleum products	−2.31	−7.78***	−1.97	−8.23***	−2.41	−15.65***
chemicals and chemical products	−2.61	−5.93***	−2.14	−8.38***	−2.46	−11.18***
pharmaceutical products	−1.94	−14.74***	−0.14	−17.04***	−1.44	−11.63***
rubber and plastic products	−2.05	−11.65***	−0.80	−10.53***	−2.35	−5.34***
other non-metallic mineral products	−1.92	−12.12***	−2.29	−6.58***	−1.38	−14.51***
basic metals	−2.70	−7.61***	−2.33	−6.21***	−3.47*	−4.71***
metal products	−2.04*	−9.96***	−2.63*	−10.63***	−2.40	−4.04***
computer, electronic and optical products	−0.47	−10.79***	−1.91	−13.15***	−1.87	−11.53***
electrical equipment	−1.65	−9.96***	−0.75	−12.44***	−3.09	−3.88***
machinery and equipment n.e.c.	−2.73*	−12.45***	−1.81	−14.27***	−3.41*	−3.95***
motor vehicles, trailers and semi-trailers	−2.91*	−12.38***	0.18	−12.52***	−2.86	−7.29***
other transport equipment	−0.45	−12.41***	−2.85*	−14.18***	−1.69	−14.06***
furniture	−3.30*	−9.11***	−2.05	−13.62***	−0.78	−16.58***
other products	−2.16	−9.91***	−2.39	−14.65***	−1.27	−12.27***

Notes: The table presents the ADF statistics. One, two and three asterisks indicate statistical significance at the level of 10%, 5% and 1%, respectively.

Table 3. Linear specification estimates.

Manufacture of:	Test for cointegration	${\hat{\mathit{\delta }}}_1$	H0: ${\mathit{\delta }}_1=0$	H0: ${\mathit{\delta }}_1=1$	${\hat{\mathit{\beta }}}_0$	B-G test for autocorrelation	p	q
food	19.42***	0.40	46.60***	101.49***	0.49***	5.70	1	0
beverages	7.14**	0.63	2.72*	0.61	0.35***	1.54	1	0
textiles	16.36***	0.84	31.51***	1.20	0.53***	1.98	1	0
wearing apparel	11.93***	0.67	13.04***	3.07*	0.47***	4.54	1	0
leather and related products	29.23***	0.59	15.84***	7.52**	0.47***	1.60	1	0
wood, cork, straw and wicker products	34.50***	0.76	123.80***	12.26***	0.51***	2.01	1	0
paper and paper products	10.16***	0.52	10.64***	9.29***	0.31***	8.16*	1	0
printing and reproduction	27.97***	0.59	17.00***	8.33***	1.06***	8.32*	1	0
coke and refined petroleum products	18.57***	1.06	32.37***	0.11	0.82***	3.72	1	0
chemicals and chemical products	2.68	–	–	–	0.45***	2.60	1	2
pharmaceutical products	3.06*	−0.23	0.10	–	0.70***	8.76*	1	0
rubber and plastic products	12.47***	0.74	25.67***	3.30*	0.41***	0.32	1	0
other non-metallic mineral products	10.22***	0.21	1.79	–	0.35***	9.28*	1	0
basic metals	11.01***	0.69	13.89***	3.82*	0.47***	7.72	1	0
metal products	21.12***	0.61	32.41***	13.58***	0.42***	3.01	1	0
computer, electronic and optical products	1.81	–	–	–	0.58***	2.51	1	0
electrical equipment	0.00	–	–	–	0.44***	4.49	1	0
machinery and equipment n.e.c.	4.11**	0.21	0.99	–	0.49***	5.17	1	0
motor vehicles, trailers and semi-trailers	20.54***	0.31	27.78***	136.13***	0.41***	6.40	1	1
other transport equipment	15.08***	0.50	18.41***	19.06***	0.39***	4.94	1	0
furniture	4.45**	0.56	16.29***	10.20***	0.68***	1.44	1	0
other products	6.10**	0.62	5.68**	2.11	0.73***	3.56	1	0

Notes: Cointegration test verifies H₀: $\gamma ={\beta }_1=0$. One, two and three asterisks indicate statistical significance at the level of 10%, 5% and 1%, respectively. B-G stands for the Breusch-Godfrey test. P stands for the number of lags of $p_t^{\exp \ast }$, q - for the number of lags of $e_t$. The lag structure is established based on the Schwarz information criterion and controlling for serial correlation of residuals.

Table 4. Threshold specification estimates (1).

Manufacture of:	Test for cointegration	Test for LR linearity	Test for LR symmetry	$\hat{\mathit{\gamma }}$	${\hat{\mathit{\tau }}}_1$	${\hat{\mathit{\tau }}}_2$	B-G test for autocorrelation	p	q
food	31.56***	22.60***	16.01***	−0.28***	−1.2%	0.1%	7.32	1	0
beverages	20.19***	7.44**	8.36***	−0.21***	−1.0%	0.5%	5.30	1	0
textiles	57.52***	40.43***	11.75***	−0.37***	−0.8%	1.0%	2.07	1	3
wearing apparel	37.59***	24.25***	18.38***	−0.31***	−1.6%	0.7%	2.44	1	0
leather and related products	43.52***	13.19***	3.84*	−0.16***	−1.7%	1.3%	2.48	1	0
wood, cork, straw and wicker products	34.73***	5.64*	2.61	−0.16***	−1.5%	1.0%	3.90	1	2
paper and paper products	25.16***	33.12***	29.54***	−0.26***	−1.2%	1.4%	8.30*	1	0
printing and reproduction	41.76***	1.34	0.07	−0.49***	−0.7%	0.9%	5.72	1	1
coke and refined petroleum products	25.22***	15.45***	12.61***	−0.33***	−1.0%	1.4%	4.10	1	1
chemicals and chemical products	9.02***	11.64***	11.42***	−0.14***	−0.1%	1.0%	4.69	1	1
pharmaceutical products	17.12***	13.80***	5.76**	−0.23**	−1.5%	0.9%	4.51	1	0
rubber and plastic products	25.82***	17.20***	4.83**	−0.22***	−1.2%	1.3%	6.28	1	3
other non-metallic mineral products	23.74***	18.01***	9.12***	−0.29***	−1.0%	1.5%	4.79	1	1
basic metals	6.52**	12.64***	7.58***	−0.18***	−0.4%	1.1%	6.13	1	0
metal products	33.24***	21.00***	17.66***	−0.17***	−0.7%	1.5%	0.60	1	3
computer, electronic and optical products	10.27***	10.80***	2.42	−0.12***	−1.0%	1.2%	4.02	1	0
electrical equipment	3.61*	9.71***	0.25	−0.07*	−0.6%	0.7%	3.99	1	0
machinery and equipment n.e.c.	4.54**	5.54*	0.67	−0.21***	−0.9%	0.7%	4.40	1	0
motor vehicles, trailers and semi-trailers	27.33***	25.70***	15.49***	−0.24***	−1.0%	0.8%	6.12	1	1
other transport equipment	12.34***	9.92***	1.23	−0.16***	−1.4%	0.5%	6.43	1	1
furniture	13.46***	13.38***	6.04**	−0.18***	−0.9%	0.8%	1.75	1	1
other products	18.79***	5.96**	0.03	−0.13***	−1.1%	1.0%	7.21	1	0

Notes: Cointegration test verifies H₀: $\gamma ={\beta }_1^{+}={\beta }_1^0={\beta }_1^{-}=0$, linearity test verifies H₀: ${\beta }_1^{+}={\beta }_1^0={\beta }_1^{-}$ and symmetry test verifies H₀: ${\beta }_1^{+}={\beta }_1^{-}$. One, two and three asterisks indicate statistical significance at the level of 10%, 5% and 1%, respectively. B-G stands for the Breusch-Godfrey test. P stands for the number of lags of $p_t^{exp\ast }$, q – for the number of lags of $e_t$. The lag structure is established based on the Schwarz information criterion and controlling for serial correlation of residuals.

Table 5. Threshold specification estimates (2): the short-run estimates.

Manufacture of:	${\hat{\mathit{\beta }}}_0^{-}$	${\hat{\mathit{\beta }}}_0^0$	${\hat{\mathit{\beta }}}_0^{+}$	Test for SR linearity
food	0.57***	0.43***	0.42***	1.74
beverages	0.07	1.25***	0.46**	4.50***
textiles	0.56***	0.52***	0.60***	0.13
wearing apparel	0.30***	0.47*	0.66***	2.65*
leather and related products	0.54***	0.33*	0.34***	0.62
wood, cork, straw and wicker products	0.53***	0.47***	0.50***	0.12
paper and paper products	0.21**	0.72***	0.29**	2.64*
printing and reproduction	0.98***	0.40***	0.27***	0.49
coke and refined petroleum products	0.54***	1.21***	0.80***	1.12
chemicals and chemical products	0.45***	0.62***	0.48***	0.34
pharmaceutical products	0.75***	0.58**	0.46***	0.75
rubber and plastic products	0.46***	0.52***	0.31***	0.58
other non-metallic mineral products	0.43***	0.35*	0.28***	0.46
basic metals	0.40***	0.43*	0.61***	0.96
metal products	0.32***	0.42***	0.55***	3.77**
computer, electronic and optical products	0.50***	0.52*	0.67***	0.72
electrical equipment	0.29***	0.06	0.69***	9.56***
machinery and equipment n.e.c.	0.60***	0.63**	0.36***	2.06
motor vehicles, trailers and semi-trailers	0.42***	0.30**	0.46***	0.83
other transport equipment	0.33***	0.59***	0.47***	1.86
furniture	0.65***	0.76***	0.72***	0.92
other products	0.67***	0.53*	0.82***	1.08

Notes: Linearity test verifies H₀: ${\beta }_0^{+}={\beta }_0^0={\beta }_0^{-}$. One, two and three asterisks indicate statistical significance at the level of 10%, 5% and 1%, respectively.

Table 6. Threshold specification estimates (3): the long-run estimates

Manufacture of:	${\hat{\mathit{\delta }}}_1^{-}$	H0: ${\mathit{\delta }}_1^{-}=0$	H0: ${\mathit{\delta }}_1^{-}=1$	${\hat{\mathit{\delta }}}_1^0$	H0: ${\mathit{\delta }}_1^0=0$	H0: ${\mathit{\delta }}_1^0=1$	${\hat{\mathit{\delta }}}_1^{+}$	H0: ${\mathit{\delta }}_1^{+}=0$	H0: ${\mathit{\delta }}_1^{+}=1$
food	0.39	68.69***	164.51***	1.04	48.69***	0.07	0.18	5.79**	119.79***
beverages	0.32	2.78*	12.38***	2.87	22.83***	9.69***	0.06	0.06	–
textiles	0.70	126.79***	23.00***	−0.62	14.42***	97.52***	0.81	202.56***	11.10***
wearing apparel	0.81	81.56***	4.64**	−0.06	0.09	–	0.35	13.17***	43.89***
leather and related products	0.63	45.18***	15.86***	−0.54	2.51	–	0.75	16.35***	1.82
wood, cork, straw and wicker products	0.66	53.34***	14.08***	1.10	35.85***	0.30	0.71	64.64***	10.31***
paper and paper products	0.41	13.40***	28.24***	0.32	1.63	–	0.92	50.91***	0.40
printing and reproduction	0.62	23.03***	8.95***	1.18	3.66*	0.08	0.60	14.13***	6.03**
coke and refined petroleum products	0.89	31.34***	0.45	2.53	19.81***	7.24**	0.22	0.85	–
chemicals and chemical products	1.06	22.46***	0.08	−0.81	2.03	–	1.70	17.31***	2.92*
pharmaceutical products	0.32	5.32**	23.19***	−1.20	5.86**	19.67***	−0.11	0.27	–
rubber and plastic products	0.60	29.80***	13.54***	1.40	42.69***	3.43*	0.47	22.24***	27.49***
other non-metallic mineral products	0.35	22.51***	77.24***	−0.72	10.63***	60.92***	0.71	41.08***	6.63***
basic metals	1.03	23.72***	0.02	−1.10	5.26**	19.12***	1.39	19.10***	1.51
metal products	0.63	64.73***	23.01***	−0.31	1.97	–	1.00	52.61***	0.00
computer, electronic and optical products	1.17	14.36***	0.32	−1.96	7.82***	17.87***	0.81	3.13*	0.17
electrical equipment	0.27	0.53	–	−1.89	1.51	–	−0.26	0.23	–
machinery and equipment n.e.c.	0.45	24.06***	35.33***	−1.53	7.59***	20.80***	0.38	17.45***	46.93***
motor vehicles, trailers and semi-trailers	0.35	45.85***	162.51***	−0.42	2.34	–	0.42	56.19***	104.35***
other transport equipment	0.41	10.85***	21.91***	−0.82	4.27**	21.12***	0.47	8.39***	10.85***
furniture	0.64	101.12***	33.19***	−0.68	3.32*	20.25***	0.68	124.57***	27.81***
other products	0.90	25.25***	0.29	−1.29	3.08*	9.74***	0.89	16.13***	0.25

Notes: One, two and three asterisks indicate statistical significance at the level of 10%, 5% and 1%, respectively.

Figure 1. Pass-through estimates against sectoral characteristics.

Notes: Technologic intensity is assigned according to UNIDO classification, where L stands for low technology, M for medium technology and H for medium-high or high technology. Corr stands for Pearson’s correlation coefficient.

Figure 2. Estimated thresholds against sectoral characteristics.

Notes: Technologic intensity is assigned according to UNIDO classification, where L stands for low technology, M for medium technology and H for medium-high or high technology. Corr stands for Pearson’s correlation coefficient. Blue dots represent the lower threshold $\left({\hat{\tau }}_1\right)$, while the orange ones – the upper threshold $\left({\hat{\tau }}_1\right)$.

Figure 3. Estimated speed of adjustment to the long-run equilibrium against sectoral characteristics.

Notes: Technologic intensity is assigned according to UNIDO classification, where L stands for low technology, M for medium technology and H for medium-high or high technology. Corr stands for Pearson’s correlation coefficient.