Does Inflation Targeting decrease Exchange Rate Pass-through in Emerging Countries?

Dramane Coulibaly and Hubert Kempf ()

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: In this paper, we empirically examine the effect of inflation targeting on the exchange rate pass-through to prices in emerging countries. We use a panel VAR that allows us to use the larger data set on twenty-seven emerging countries (fifteen inflation targeters and twelve inflation nontargeters). Our evidence suggests that inflation targeting in emerging countries has helped to reduce the pass-through to various price indexes (import prices, producer prices and consumer prices) from a higher level to a new level that is significantly different from zero. The variance decomposition shows that the contribution of exchange rate shocks to prices fluctuations is more important in emerging targeters compared to nontargeters, and the contribution of exchange rate shocks to price fluctuations in emerging targeters declines after adopting inflation targeting.

Keywords: Inflation targeting; exchange rate Pass-through; panel VAR (search for similar items in EconPapers)
JEL-codes: E31 E52 F41 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-05
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
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Citations: View citations in EconPapers (35)

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http://mse.univ-paris1.fr/pub/mse/CES2010/10049.pdf (application/pdf)

Related works:
Working Paper: Does Inflation Targeting decrease Exchange Rate Pass-through in Emerging Countries? (2010)
Working Paper: Does Inflation Targeting decrease Exchange Rate Pass-through in Emerging Countries ? (2010)
Working Paper: Does Inflation Targeting decrease Exchange Rate Pass-through in Emerging Countries ? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:10049

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