IMF Working Papers

State-Dependent Exchange Rate Pass-Through

By Yan Carriere-Swallow, Melih Firat, Davide Furceri, Daniel Jimenez

April 28, 2023

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Yan Carriere-Swallow, Melih Firat, Davide Furceri, and Daniel Jimenez. State-Dependent Exchange Rate Pass-Through, (USA: International Monetary Fund, 2023) 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

We estimate how the rate of pass-through from the exchange rate to domestic prices varies across states of the economy and depending on the shocks that drive fluctuations in the exchange rate. We confirm several results from the literature and uncover new facts. Drawing on the experience of a large sample of advanced and emerging market economies over the past 30 years, we document that exchange rate pass-through significantly larger during periods of high inflation and elevated uncertainty. Using a novel identification strategy, we also show that pass-through is higher when exchange rate fluctuations are driven by U.S. monetary policy.

Keywords: Exchange rate, Inflation, Pass-through, State-dependence

Publication Details

  • Pages:

    83

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2023/086

  • Stock No:

    WPIEA2023086

  • ISBN:

    9798400240461

  • ISSN:

    1018-5941