Exchange Rate Pass-Through in Sub-Saharan African Economies and its Determinants

Ivohasina Razafimahefa

No 2012/141, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes the exchange rate pass-through to domestic prices and its determinants in sub-Saharan African countries. It finds that the pass-through is incomplete. The pass-through is larger following a depreciation than after an appreciation of the local currency. The average elasticity is estimated at about 0.4. It is lower in countries with more flexible exchange rate regimes and in countries with a higher income. A low inflation environment, a prudent monetary policy, and a sustainable fiscal policy are associated with a lower pass-through. The degree of pass-through has declined in the SSA region since the mid-1990s following marked improvements in macroeconomic and political environments.

Keywords: WP; exchange rate; pass-through; pass-through elasticity; NEER; inflation; impulse responses; price level; pass-through shift; pass-through hypothesis; exchange rate regime; stability objective; hypothesis to CPI; elasticities of pass-through; exchange rate variability; exchange rate depreciation; timing of the pass-through shift; magnitude of pass-through; Exchange rate arrangements; Exchange rate adjustments; Exchange rate pass-through; Exchange rates; Sub-Saharan Africa; West Africa (search for similar items in EconPapers)
Pages: 24
Date: 2012-06-01
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Citations: View citations in EconPapers (29)

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