A new look at exchange rate pass-through in the G-7 countries

Rebeca Jiménez-Rodríguez and Amalia Morales-Zumaquero

Journal of Policy Modeling, 2016, vol. 38, issue 5, 985-1000

Abstract: This paper analyzes the exchange rate pass-through (ERPT) to domestic prices (consumer and producer prices), and to import prices for the G-7 countries. It is our aim to answer three key questions with strong economic policy implications: (i) is there a lower rate of ERPT in countries with an increased emphasis in monetary policy based on price stability?; (ii) is there a significant connection between ERPT and inflation volatility?; and (iii) do exchange rate regimes have a role to explain the ERPT? Our findings suggest that: (i) Taylor's hypothesis holds; (ii) there is a robust and positive significant connection between ERPT and inflation volatility; and (iii) ERPT depends on the exchange rate regimes.

Keywords: Exchange rate pass-through; Monetary policy; Exchange rate regimes (search for similar items in EconPapers)
JEL-codes: E31 F31 F41 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:38:y:2016:i:5:p:985-1000

DOI: 10.1016/j.jpolmod.2016.06.007

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