Energy-price shocks, exchange rates, and inflation dynamics in Asia–Pacific: evidence on state-dependent pass-through

Abstract This paper examines how global energy-price movements transmit to domestic producer and consumer inflation in Asia–Pacific economies. The analysis combines an exchange-rate-adjusted local-currency energy-cost measure with a cross-sectionally augmented nonlinear ARDL framework and state-dependent local projections. The revised design separates three mechanisms that are frequently conflated in linear pass-through estimates: the upstream-to-downstream price-chain wedge, sign asymmetry between cost increases and decreases, and regime dependence across inflation environments. The evidence indicates incomplete but economically meaningful pass-through. Producer prices react more strongly and more rapidly than consumer prices, implying partial absorption through distribution margins, administered prices, and fiscal smoothing. Cost increases transmit more fully than cost decreases, especially upstream. Inflation responses are also larger and more persistent in high-inflation regimes, consistent with weaker expectation anchoring and stronger second-round propagation. The findings imply that monetary credibility, exchange-rate conditions, and pricing institutions jointly determine the inflation cost of external energy shocks. The interpretation is deliberately bounded: the estimates identify local-currency energy-cost pass-through rather than a fully structural oil-supply shock, and all reported magnitudes are interpreted in percentage-point terms for the stated sample, shock definition, and model horizon.