Evolution of the exchange rate pass-through into prices in Peru: An empirical application using TVP-VAR-SV models

Gabriel Rodríguez, Paul Castillo B., Roberto Calero, Rodrigo Salcedo Cisneros and Miguel Ataurima

Journal of International Money and Finance, 2024, vol. 142, issue C

Abstract: This study examines the evolution of exchange rate pass-through (ERPT) into import, producer, and consumer prices in Peru from 1995Q2 to 2022Q4 using time-varying parameter and stochastic volatility VAR models. Findings reveal a resurgence of ERPTs into import and producer prices since 2009, particularly during the period of a strong US dollar following the 2013 taper tantrum and from 2020 to 2022. Increased uncertainty surrounding the exchange rate and future macroeconomic policies, triggered by the political uncertainty following the 2021 general elections, may have contributed to this trend. Short-term ERPT exceeds long-term ERPT, which might reflect prevalent price dollarization in Peru's import and producer prices. Consumer ERPT remained stable at around 10% until 2009, then increased to 15%, indicating lower levels of price dollarization. This paper sheds light on ERPT dynamics in Peru, carrying implications for policymakers in emerging economies.

Keywords: Exchange rate pass-through into prices; Vector autoregressive model with time-varying parameters; Stochastic volatility; Bayesian estimation and comparison of models; Deviance information criterion; Marginal likelihood; Peruvian economy (search for similar items in EconPapers)
JEL-codes: C11 C32 E31 F31 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Evolution of the Exchange Rate Pass-Throught into Prices in Peru: An Empirical Application Using TVP-VAR-SV Models (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:142:y:2024:i:c:s026156062400010x

DOI: 10.1016/j.jimonfin.2024.103023

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