Exchange rate Pass-through and Monetary Policy in Transition Economy: Evidence from Tunisia with disaggregated VAR Analysis

Ahlem Dahem and Fatma Siala Guermazi

MPRA Paper from University Library of Munich, Germany

Abstract: The issue of exchange rate pass-through has raised interest in international economy, a necessary step for adopting an adequate monetary policy, which accentuated in 2000 given its impacts on the monetary policy. Yet, on the academic level, research attempts at studying small open economy in a transitory period, e.g. Tunisia, seem to bring about only a few responses. Relying on monthly and quarterly data, from 2000 to 2015, this paper keeps up with SVAR modeling and price chain study, but through two different approaches: a direct aggregate approach that aims at checking the direct impact of exchange rate transmissions on the global prices, and a disaggregate approach that aims at analyzing the exchange rate degree of transmission on the various components of consumer price. To our knowledge, this study is the first attempt at exchange rate pass-through estimation through a disaggregate approach for the consumer price indexe. The main preliminary findings show that the total exchange rate pass-through is about 20% after 2011. Specifically, 10% of pass-through on the administered prices. More accurately, there is a 6% of pass-through degree for food administered prices as well as 7% of pass-through degree for energy prices (after 2011 revolution date), which contradicts the prevailing theory that admits the inexistence of pass-through for administered prices. On the whole, our findings confirm the importance of a disaggregate analysis for studying exchange rate pass-through, and can help policy makers in Tunisia to adopt the appropriate strategies for implementing monetary policy and containing inflation.

Keywords: Exchange; Rate; Pass-through; –; Monetary; policy; –; Emerging; Market; –; Disaggregated; analysis (search for similar items in EconPapers)
JEL-codes: C32 E31 E41 E52 F31 F41 O55 (search for similar items in EconPapers)
Date: 2016-09-30
New Economics Papers: this item is included in nep-ara, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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