Impact of exchange rate changes on domestic inflation: a study of a small Pacific Island economy

Tiru Jayaraman () and Chee-Keong Choong

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the effect of changes in exchange rate on consumer price level, in Fiji, known as exchange rate pass-through during a thirty year period (1982-2009). Specifically, three time periods are focused on: the pre-coup years (1982-1986); post coup years (1987-2009); and full time period (1982-2009). Monthly data on consumer price index, nominal exchange rate, monetary aggregate and interest rate are utilized. The study results show that the degree of exchange rate pass-through to domestic price was relatively low during the entire sample period at 0.183. It was 0.453 and 0.373 for the pre and post coups periods. Regardless of the sample periods under study, the monetary aggregate, as a variable plays a pivotal in stabilizing the price level.

Keywords: Exchange rate pass-through; price; monetary measure; cointegration; Granger causality (search for similar items in EconPapers)
JEL-codes: E31 F31 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33719

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