IMF Working Papers

Pass-Through of External Shocks to Inflation in Sri Lanka

By Nombulelo Braiton

March 1, 2008

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Nombulelo Braiton. Pass-Through of External Shocks to Inflation in Sri Lanka, (USA: International Monetary Fund, 2008) accessed November 13, 2024
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 investigates pass-through of external shocks (exchange rate, oil price, and import price shocks) to inflation in Sri Lanka. The analysis is based on a vector autoregression (VAR) model that incorporates a distribution chain of pricing. The paper finds low and incomplete pass-through of external shocks to consumer inflation, reflecting a combination of factors including the existence of administered prices, high content of food in the consumption basket, and low persistence and volatility of the exchange rate. External shocks explain about 25 percent of the variation in consumer price inflation, reflecting room for domestic policies in controlling inflation.

Subject: Consumer prices, Exchange rates, Import prices, Inflation, Oil prices

Keywords: Core inflation, Pass-through coefficient, WP

Publication Details

  • Pages:

    26

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2008/078

  • Stock No:

    WPIEA2008078

  • ISBN:

    9781451869392

  • ISSN:

    1018-5941