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IT Countries: A Breed Apart? the case of Exchange Rate Pass-Through

Antonia López-Villavicencio () and Marc Pourroy ()
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Antonia López-Villavicencio: Univ Lyon, Université Lyon 2, GATE UMR 5824, F-69130 Ecully, France

Authors registered in the RePEc Author Service: Antonia López Villavicencio ()

No 1728, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: This paper estimates the effects of two monetary policy strategies in the exchange rate pass-through (ERPT). To this end, we employ propensity score matching and consider the adoption of a target by a country as a treatment to find suitable counterfactuals to the actual targeters. By controlling for self-selection bias and endogeneity of the monetary policy regime, we show that inflation target has helped in reducing the ERPT, with older regimes more successful than younger ones. However, a de facto flexible exchange rate regime has not noticeable advantages to reduce the extent to which exchange rate fluctuations contribute to inflation instability.

Keywords: exchange rate pass-through; inflation targeting; exchange rate regime; propensity score matching (search for similar items in EconPapers)
JEL-codes: E31 E42 E52 C30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cta, nep-mac and nep-opm
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:1728

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