Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?
IMF Working Papers, December 1, 2001
Source details
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- Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?
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Bibliographic details
- Authors: Dalia S Hakura, Ehsan U. Choudhri
- Published: December 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451859867.001
Research question and theoretical approach
- Tests the hypothesis suggested by Taylor (2000) that a low inflationary environment leads to a low exchange rate pass-through to domestic prices.
- Derives a pass-through relation based on new open economy macroeconomic models.
Data and empirical strategy
- Uses a large database that includes 1979-2000 data for 71 countries to estimate the pass-through relation.
- Sample period: 1979-2000.
- Number of countries: 71.
Key findings
- There is strong evidence of a positive and significant association between the pass-through and the average inflation rate across countries and periods.
- The inflation rate dominates other macroeconomic variables in explaining cross-regime differences in the pass-through.
Subjects and keywords
- Subject: Consumer price indexes, Exchange rate adjustments, Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, Prices
- Keywords: Africa, Consumer price indexes, CPI pass-through, exchange rate, Exchange rate adjustments, Exchange rate pass-through, Exchange rates, import price pass-through, inflation, inflation rate, inflation regime, Pass-through, pass-through estimate, pass-through measure, pass-through relation, period pass-through, WP
IMF Working Paper No. 2001/194 — Dalia S Hakura and Ehsan U. Choudhri, December 1, 2001.