Exchange Rate Pass-Through in the Caucasus and Central Asia

IMF Working Papers, August 7, 2020

Source details

Monthly data over the January 1995–May 2020 period for seven Caucasus and Central Asia (CCA) countries.
Estimations are performed using the local projections method.

Average pass-through in the CCA:
- about 10 percent on impact
- about 25 percent after 12 months
No evidence of asymmetric ERPT with respect to the size and the sign of exchange rate changes.
The pass-through is broadly unchanged in fixed versus floating exchange rate regimes.
There has been a downward shift in the speed of ERPT in the aftermath of the global financial crisis as CCA countries have entered a relatively low inflation environment.

The pass-through estimates could be used by CCA monetary authorities for inflation projections.
The absence of non-linearities in the pass-through with respect to the exchange rate regime suggests that transition from fixed to floating exchange rate regimes in the region is not likely to impose additional inflationary costs.

Subjects: Exchange rate adjustments, Exchange rate arrangements, Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, Prices
Keywords: CCA country, Central Asia and the Caucasus, confidence interval, CPI inflation, currency vis-à-vis, Exchange rate adjustments, Exchange rate arrangements, Exchange rate pass-through, exchange rate regime, Exchange rates, Global, IMF staff estimation, Inflation, inflation environment, local projections, pass-through in CIS country, Sub-Saharan Africa, WP

Source: "Exchange Rate Pass-Through in the Caucasus and Central Asia", IMF Working Papers, August 7, 2020.