Impact of Exchange Rate Pass-Through on Inflation in India

Ramkishen Rajan and Venkataramana Yanamandra
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Venkataramana Yanamandra: The World Bank Group

Chapter 4 in Managing the Macroeconomy, 2015, pp 110-136 from Palgrave Macmillan

Abstract: Abstract The exchange rate channel of monetary policy is important for many developing countries. When a central bank lowers the policy rates, this action often results in a depreciation of that country’s currency which in turn makes imports more expensive while enhancing the price competitiveness of that country’s exports. However, for the exchange rate channel to operate effectively, the implicit assumption is that exporters will adjust the home price of their goods or services in such a way as to keep the price in the importing country more or less unchanged (by either adjusting costs or mark-ups or some combination of the two). More generally, it is possible that exporters may not fully pass-through exchange rate movements to prices in importing countries by adjusting their domestic country prices.

Keywords: Exchange Rate; Consumer Price Index; Import Price; Export Price; Exchange Rate Change (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-53414-9_4

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DOI: 10.1057/9781137534149_4

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