Monetary Policy Credibility and Exchange Rate Pass-Through

Yan Carrière-Swallow, Bertrand Gruss, Nicolas Magud and Fabian Valencia

No 2016/240, IMF Working Papers from International Monetary Fund

Abstract: A long-standing conjecture in macroeconomics is that recent declines in exchange rate pass-through are in part due to improved monetary policy performance. In a large sample of emerging and advanced economies, we find evidence of a strong link between exchange rate pass-through to consumer prices and the monetary policy regime’s performance in delivering price stability. Using input-output tables, we decompose exchange rate pass-through to consumer prices into a component that reflects the adjustment of imported goods at the border, and another that captures the response of all other prices. We find that price stability and central bank credibility have reduced the second component.

Keywords: WP; monetary policy; least squares; Exchange rate pass-through; monetary policy credibility; import content; pass-through coefficient; pass-through to consumer prices; pass-through estimate; Consumer prices; Import prices; Inflation; Nominal effective exchange rate; Europe; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 33
Date: 2016-12-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Journal Article: Monetary Policy Credibility and Exchange Rate Pass-Through (2021)
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