Time-varying exchange rate pass-through to gasoline prices: Evidence from Asian economies

Center of Innovation in Economics Finance and Investment, Faculty of Economics, Chiang Mai University, Chaing Mai, Thailand, 50202

^* Corresponding author: This email address is being protected from spambots. You need JavaScript enabled to view it.

Abstract

This study examines exchange rate pass-through (ERPT) to domestic gasoline prices in ten Asian economies using monthly data from 2016-2024. Panel unit root tests and model diagnostics including the F-test, Breusch - Pagan LM test, and Hausman test indicate that the fixed effects model is the most appropriate specification. The empirical results show that ERPT in Asia is positive but incomplete: a 1% depreciation of the local currency increases domestic gasoline prices by only 0.184%, reflecting the presence of fuel subsidies, price regulations, and smoothing mechanisms that dampen exchange rate transmission. Brent crude oil prices exert a significant effect, with a 1% increase raising gasoline prices by 0.335%, while domestic inflation also plays a dominant role, as indicated by a CPI coefficient of 0.646. To capture time variation, an expanding-window rolling regression is employed, revealing a clear downward trend in ERPT over the sample period, with pass-through declining and stabilizing over time. This pattern suggests increasingly effective policy interventions in Asian fuel markets that mitigate the impact of exchange rate fluctuations on retail gasoline prices. Overall, the findings highlight the evolving role of exchange rates, global oil prices, and domestic policies in shaping gasoline price dynamics in Asia.