Exchange rate pass-through in emerging countries: Do the inflation environment, monetary policy regime and central bank behavior matter?

Antonia López-Villavicencio () and Valérie Mignon ()
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Antonia López-Villavicencio: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, we estimate the exchange rate pass-through (ERPT) to import and consumer prices for a sample of 14 emerging countries over the 1994Q1-2015Q3 period. To this end, we augment the traditional bivariate relationship between the nominal effective exchange rate and inflation by accounting for monetary stability proxied by the inflation environment, monetary policy regime and central bank behavior. We show that both the level and volatility of inflation, as well as adopting an inflation target or the transparency of monetary policy decisions clearly reduce ERPT to consumer prices. However, uncertainty about domestic monetary policy seems less relevant in explaining the pass-through to the price of imports.

Keywords: exchange rate pass-through; inflation; emerging countries; monetary policy (search for similar items in EconPapers)
Date: 2017-09-08
Note: View the original document on HAL open archive server: https://hal.science/hal-05455972v1
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Published in Journal of International Money and Finance, 2017, 79, pp.20-38. ⟨10.1016/j.jimonfin.2017.09.004⟩

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Journal Article: Exchange rate pass-through in emerging countries: Do the inflation environment, monetary policy regime and central bank behavior matter? (2017)
Working Paper: Exchange rate pass-through in emerging countries: Do the inflation environment, monetary policy regime and central bank behavior matter? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05455972

DOI: 10.1016/j.jimonfin.2017.09.004

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