## State-Dependent Exchange Rate Pass-Through

_IMF Working Papers, April 28, 2023_

## Source details

**Canonical URL:** [State-Dependent Exchange Rate Pass-Through](https://www.imf.org/en/publications/wp/issues/2023/04/28/state-dependent-exchange-rate-pass-through-532680)

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## Bibliographic details
- Authors: Yan Carriere-Swallow, Melih Firat, Davide Furceri, Daniel Jimenez
- Published: April 28, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400240461.001

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### Summary and key findings
- Objective: 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.
- Confirmed results from the literature and uncovered new facts.
- Main empirical findings:
  - Exchange rate pass-through is significantly larger during periods of high inflation.
  - Exchange rate pass-through is significantly larger during periods of elevated uncertainty.
  - Pass-through is higher when exchange rate fluctuations are driven by U.S. monetary policy, based on a novel identification strategy.
- Sample and scope: Drawing on the experience of a large sample of advanced and emerging market economies over the past 30 years.

### Methodology and identification
- Approach: State-dependent estimation of pass-through to domestic prices.
- Novelty: Uses a novel identification strategy to attribute exchange rate fluctuations to U.S. monetary policy and measure differential pass-through associated with that shock.
- Focus: Variation of pass-through across macroeconomic states (inflation, uncertainty) and across shock origins (including U.S. monetary policy).

### Policy implications and relevance
- Implication: Monetary and exchange rate policy effectiveness depends on macroeconomic state—higher inflation and elevated uncertainty amplify pass-through to domestic prices.
- Implication: Global policy spillovers, particularly from U.S. monetary policy, can increase domestic price sensitivity to exchange rate movements.
- Relevance: Findings are relevant for exchange rate arrangements, inflation targeting, and macroeconomic stabilization strategies in both advanced and emerging market economies.

### Publication and metadata
- Authors: Yan Carriere-Swallow, Melih Firat, Davide Furceri, Daniel Jimenez
- Publication date: April 28, 2023
- Series: IMF Working Papers, Working Paper No. 2023/086
- Issue: 086
- Volume: 2023
- Pages: 83
- DOI: https://doi.org/10.5089/9798400240461.001
- ISBN: 9798400240461
- ISSN: 1018-5941
- Subjects: Exchange rate adjustments, Exchange rate arrangements, Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, Prices
- Keywords: Exchange rate, Exchange rate adjustments, Exchange rate arrangements, Exchange rate pass-through, Exchange rates, Global, inflation, inflation uncertainty, pass-through, pass-through coefficient, pass-through from the exchange rate, rate of pass-through, rate pass-through, state-dependence

*IMF Working Papers — State-Dependent Exchange Rate Pass-Through (April 28, 2023).*

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2023/04/28/state-dependent-exchange-rate-pass-through-532680_