Exchange Rate Pass-Through in the Caucasus and Central Asia

August 7, 2020

Preview Citation

Format: Chicago

Tigran Poghosyan. Exchange Rate Pass-Through in the Caucasus and Central Asia, (USA: International Monetary Fund, 2020) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper estimates the extent and speed of exchange rate pass-through (ERPT) in seven Caucasus and Central Asia (CCA) countries using monthly data over the January 1995–May 2020 period. The estimations are performed using the local projections method. We find that the average pass-through in the CCA is about 10 percent on impact and about 25 percent after 12 months. There is 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 the 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.

Subject: 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

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/154
Stock No:

WPIEA2020154
ISBN:

9781513552958
ISSN:

1018-5941

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