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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: GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique

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

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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)
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Date: 2017
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01614817
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