Exchange Rate Pass-Through to Prices: VAR Evidence for Albania

Adelajda Matuka

MPRA Paper from University Library of Munich, Germany

Abstract: This paper estimates the impact of exchange rate shocks to prices in Albania from 2000Q1 to 2017Q1. The empirical analysis is based on a Vector Autoregressive approach for Albanian economy following Cholesky decomposition scheme. Impulse-response functions give evidence for an incomplete “pass-through” of exchange rate shocks to prices. Impulse-response functions to oil shocks indicates initial positive values for import and producer prices and negative value for consumer prices and interest rates. Variance decomposition reveal that the highest fluctuations of import prices is triggered by growth rate and oil prices shocks, whereas the variance of producer prices and consumer prices is explained by its own innovations. Exchange rate’s innovations are less aggressive to import prices and producer prices then to consumer prices. We perform the robustness check allowing interest rate to be ordered before exchange rates and the results do not change from the previous findings.

Keywords: Exchange Rate; Pass Through Effect; Inflation; Vector Autoregressive (search for similar items in EconPapers)
JEL-codes: C32 E31 E41 F41 (search for similar items in EconPapers)
Date: 2019-02-05
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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