An Empirical Assessment of the Exchange Rate Pass-through in Mozambique

IMF Working Papers, May 6, 2021

Source details

Canonical URL: An Empirical Assessment of the Exchange Rate Pass-through in Mozambique

Study estimates the exchange rate passthrough (ERPT) to inflation in Mozambique using econometric techniques on a sample spanning from 2001 to 2019.
Results suggest that the ERPT is assymetric, sizable and fast, with 50 percent of the exchange rate variations passing through to prices in less than six months.
Policy implication highlighted: policy-makers should continue to pursue low and stable inflation and develop a strong track record of prudent macroeconomic policies for the ERPT to decline.

ERPT is described as assymetric, sizable and fast.
50 percent of exchange rate variations pass through to prices in less than six months.
Emphasis on the role of the inflation environment and macroeconomic policy credibility in reducing ERPT.

Continue to pursue low and stable inflation.
Develop a strong track record of prudent macroeconomic policies to reduce ERPT over time.
Maintain monetary policy frameworks that support credibility and price stability.

Subjects: Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, Monetary policy, Monetary policy frameworks, Nominal effective exchange rate, Prices
Keywords: Africa, CPI response, Exchange rate pass-through, Exchange rates, Global, Inflation, inflation environment, long-run ERPT elasticity, Monetary policy frameworks, Nominal effective exchange rate, Philips-perron unit root test, speed of the exchange rate passthrough, Sub-Saharan Africa