Inflation targeting and the pass-through effect: The case of Mongolia

Hiroyuki Taguchi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims to provide empirical evidence on the relationship between inflation targeting and the pass-through effect from exchange rate to consumer prices, focusing on the case of Mongolia. The study estimates a vector-autoregressive model, and examines the impulse responses of consumer prices to the shock of exchange rate for the pre-inflation targeting period and the post-inflation targeting period. The empirical analysis identified the existence of the pass-through effect during the pre-inflation targeting period and the loss of the pass-through during the post-inflation targeting period. It was speculated that the loss of the pass-through comes from the “forward-looking” monetary policy rule in Mongolian inflation targeting, so that it can work on the expectations of domestic agents such that they are less inclined to change prices in response to a given exchange rate shock.

Keywords: Inflation Targeting; Pass-through Effect; Mongolia; Vector Autoregressive Model; Forward-looking Rule (search for similar items in EconPapers)
JEL-codes: E52 F31 O53 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-cba, nep-cis, nep-mac, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:92988

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