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Monetary policy credibility and exchange rate pass-through: Some evidence from emerging countries

Abdul Aleem and Amine Lahiani

Economic Modelling, 2014, vol. 43, issue C, 21-29

Abstract: Considering external constraints on monetary policy in emerging countries, we propose a semi-structural vector autoregressive model with exogenous variables (VARX) to examine the exchange rate pass-through to domestic prices. We demonstrate that a lower exchange rate pass-through is associated with a credible monetary policy aiming at controlling inflation. The empirical results suggest that the exchange rate pass-through is higher in Latin American countries than in East Asian countries. The exchange rate pass-through has declined after the adoption of an inflation targeting monetary policy.

Keywords: Exchange rate pass-through; Emerging countries; Monetary policy (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:43:y:2014:i:c:p:21-29

DOI: 10.1016/j.econmod.2014.06.020

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