Exchange Rate Pass-Through in Sub-Saharan African Economies and its Determinants

Author/Editor:

Ivohasina F Razafimahefa

Publication Date:

June 1, 2012

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper analyzes the exchange rate pass-through to domestic prices and its determinants in sub-Saharan African countries. It finds that the pass-through is incomplete. The pass-through is larger following a depreciation than after an appreciation of the local currency. The average elasticity is estimated at about 0.4. It is lower in countries with more flexible exchange rate regimes and in countries with a higher income. A low inflation environment, a prudent monetary policy, and a sustainable fiscal policy are associated with a lower pass-through. The degree of pass-through has declined in the SSA region since the mid-1990s following marked improvements in macroeconomic and political environments.

Series:

Working Paper No. 2012/141

Subject:

English

Publication Date:

June 1, 2012

ISBN/ISSN:

9781475503982/1018-5941

Stock No:

WPIEA2012141

Pages:

24

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