Exchange Rate Pass-Through in Spain

Author/Editor:

Zuzana Murgasova

Publication Date:

October 1, 1996

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 examines the factors underlying the stability of inflation observed following devaluations of the Spanish peseta, which took place during the 1992-93 Exchange Rate Mechanism (ERM) crisis. The long-run equilibrium relationships between the exchange rate and the aggregate price indices are estimated using the Johansen maximum likelihood-method. The short-run dynamics are obtained from error-correction models. The model is then simulated by calibrating changes in the exogenous variables to their actual values. The results indicate that the cost-push-up effect of devaluations may have been completely offset by determinants of the cyclical position of the economy and the low inflation rate in 1993-94 should not be viewed as unusual.

Series:

Working Paper No. 1996/114

Subject:

Exchange rate adjustments Exchange rate pass-through Export prices Foreign exchange Import prices Inflation Prices

English

Publication Date:

October 1, 1996

ISBN/ISSN:

9781451943412/1018-5941

Stock No:

WPIEA1141996

Pages:

32

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