In Search of the Lost Exchange Rate Pass-Through in Mexico

Samuel Martinez and Daniel Ventosa-Santaulària ()
Additional contact information
Daniel Ventosa-Santaulària: Aix-Marseille Univ., CNRS, AMSE, Marseille, France, https://www.ventosa-santaularia.com

No 2536, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: Exchange rate pass-through (ERPT) is a key channel through which external shocks affect domestic inflation in open emerging market economies (EMEs). This paper estimates ERPT for Mexico using local projections with an instrumental-variable strategy to trace the cumulative effects of peso-dollar depreciations on consumer prices. The results indicate a relatively high degree of pass-through–higher than most estimates reported in the existing literature–suggesting that Mexican inflation responds more strongly to exchangerate movements than commonly assumed. Although price subcomponents display the expected heterogeneity (with goods showing the highest sensitivity and services the lowest), the main implication is clear: exchange-rate fluctuations remain a powerful driver of inflation dynamics, underscoring the policy relevance of monitoring currency volatility in open EMEs such as Mexico.

Keywords: Inflation; Exchange rate pass-through; ERPT; EMEs; Mexico; Local projections (search for similar items in EconPapers)
JEL-codes: E31 F14 F31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2025-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.amse-aixmarseille.fr/sites/default/fil ... rs/wp_2025_nr_36.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:2536

Access Statistics for this paper

More papers in AMSE Working Papers from Aix-Marseille School of Economics, France AMU-AMSE - 5-9 Boulevard Maurice Bourdet, CS 50498 - 13205 Marseille Cedex 1. Contact information at EDIRC.
Bibliographic data for series maintained by Gregory Cornu ().