The exchange rate pass-through to CPI inflation and its components in Azerbaijan
Vugar Rahimov and
Nigar Jafarova
No 1701, Working Papers from Central Bank of Azerbaijan Republic
Abstract:
In this study, we explore the pass-through of exchange rate fluctuations to domestic CPI inflation and its components in Azerbaijan. Using the data of 2003:Q1-2016:Q2, we estimate a VAR model and find significant but incomplete pass-through. The accumulated pass-through to aggregate CPI inflation is 28 percent within one year. According to our empirical findings, the largest pass-through (ERPT) is observed in the non-food component of CPI inflation which is 41 percent after twelve months period. Since the ERPT is an essential ingredient of price developments in Azerbaijan, it should be assessed precisely and taken into account in monetary policy decisions and inflation forecasting.
Keywords: Exchange rate pass-through; VAR model; disaggregated CPI; oil exporting countries (search for similar items in EconPapers)
JEL-codes: C51 C52 E31 E52 F31 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-02-09
New Economics Papers: this item is included in nep-cis, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:aze:wpaper:1701
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