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Exchange Rate Pass-Through to Prices: Evidence from Mexico

Carlos Capistrán (), Raul Ibarra and Manuel Ramos-Francia

No 2011-12, Working Papers from Banco de México

Abstract: This paper analyzes the pass-through of exchange rate to different price indexes in Mexico. The analysis is based on a vector autoregressive model (VAR) using monthly data from January 1997 to December 2010. The pass-through effects are calculated by means of accumulated impulse response functions to a recursively identified exchange rate shock. The results show that the exchange rate pass-through to import prices is complete, but it declines along the distribution chain in such a way that the impact on consumer prices is below 20 percent. Moreover, we find that the exchange rate pass-through seems to have decreased substantially from 2001 onwards, which coincides with the adoption of an inflation targeting regime by Banco de Mexico.

Keywords: Exchange rate pass-through; import price; consumer price; distribution chain; inflation. (search for similar items in EconPapers)
JEL-codes: E31 F31 F41 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-cba, nep-dev, nep-ifn, nep-mac, nep-mon and nep-opm
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Related works:
Journal Article: El traspaso de movimientos del tipo de cambio a los precios. Un análisis para la economía mexicana (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2011-12

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