Exchange Rate Pass-Through to Domestic Prices Does the Inflationary Environment Matter? |
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| Author:
| Hakura, Dalia
Choudhri, Ehsan U. |
| Series title: | IMF Working Papers |
| ISBN: | 978-1-4623-7305-5 |
| Publication Date: | Dec 2001 |
| Publisher: | International Monetary Fund
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| Book Format: | Ebook |
| List Price: | USD $7.50 |
Book Description:
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The paper tests a hypothesis suggested by Taylor (2000) that a low inflationary environment leads to a low exchange rate pass-through to domestic prices. to test this hypothesis, the paper derives a pass-through relation based on new open economy macroeconomic models. a large database that includes 1979-2000 data for 71 countries is used to estimate this relation. There is strong evidence of a positive and significant association between the pass-through and the average inflation rate...
More DescriptionThe paper tests a hypothesis suggested by Taylor (2000) that a low inflationary environment leads to a low exchange rate pass-through to domestic prices. to test this hypothesis, the paper derives a pass-through relation based on new open economy macroeconomic models. a large database that includes 1979-2000 data for 71 countries is used to estimate this relation. There is strong evidence of a positive and significant association between the pass-through and the average inflation rate across countries and periods. the inflation rate, moreover, dominates other macroeconomic variables in explaining cross-regime differences in the pass-through.