Newton's Gravity Law and Import Prices in the Asia Pacific

This paper investigates the proposition that an exchange rate depreciation will cause import prices to rise by more than a same magnitude appreciation will cause them to fall. This asymmetry proposition is undertaken for 8 countries across the Asia-Pacific using the Johansen and Engle and Granger procedures. The results show that 6 out of 7 countries cannot reject the hypothesis of asymmetry. It is also found that 1 estimate each exhibits absolute PPP, complete asymmetric passthrough and partial symmetric pass-through. Partial asymmetric pass-through occurs in 9 cases and 2 cases exhibit explosive asymmetric pass-through. Malaysia lacked a cointegrating vector.