Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?
Ehsan U. Choudhri,Dalia Hakura +1 more
TLDR
In this paper, the authors derived a pass-through relation based on new open economy macroeconomic models and found that a low inflationary environment leads to a low exchange rate passthrough to domestic prices.Abstract:
The paper tests a hypothesis suggested by Taylor (2000) that a low inflationary environment leads to a low exchange rate pass-through to domestic prices. To test this hypothesis, the paper derives a pass-through relation based on new open economy macroeconomic models. A large database that includes 1979-2000 data for 71 countries is used to estimate this relation. There is strong evidence of a positive and significant association between the pass-through and the average inflation rate across countries and periods. The inflation rate, moreover, dominates other macroeconomic variables in explaining cross-regime differences in the pass-through.read more
Citations
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Exchange Rates and Monetary Policy in Emerging Market Economies
TL;DR: In this paper, the effects of exchange rate regimes and alternative monetary policy rules for an emerging market economy that is subject to a volatile external environment in the form of shocks to world interest rates and the terms of trade are investigated.
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Exchange rate pass-through in emerging markets 1
TL;DR: The authors examined the degree of Exchange Rate Pass-Through (ERPT) to prices in 12 emerging markets in Asia, Latin America, and Central and Eastern Europe, based on three alternative vector autoregressive models, partly overturn the conventional wisdom that ERPT into both import and consumer prices is always higher in emerging countries than in developed countries.
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Exchange Rate Pass-through to Trade Prices: The Role of Nonlinearities and Asymmetries*
TL;DR: In this article, the authors focus on non-linearities in the reaction of profit margins to exchange rate movements, which may arise from the presence of price rigidities and switching costs.
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Slow Passthrough Around the World: A New Import for Developing Countries?
TL;DR: In this paper, the authors find empirical support for some of the factors that have been hypothesized in the literature, but not for others, using a new data set, prices of eight narrowly defined brand commodities, observed in 76 countries.
BookDOI
Dollarization of the banking system : good or bad?
TL;DR: In this paper, De Nicol� Honohan and Ize assess the benefits and risks associated with dollarization of the banking system and provide empirical evidence on the determinants of dollarization, its role in promoting financial development, and on whether dollarization is associated with financial instability.
References
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Goods Prices and Exchange Rates: What Have We Learned?
Pinelopi Koujianou Goldberg,Pinelopi Koujianou Goldberg,Pinelopi Koujianou Goldberg,Michael M. Knetter,Michael M. Knetter +4 more
TL;DR: The authors showed that incomplete pass-through is a consequence of third-degree price discrimination and that the source of the border effect has not been clearly identified, and there is little evidence yet to suggest substantial market power is implied by the observed price discrimination.
Journal ArticleDOI
Low inflation, pass-through, and the pricing power of firms
TL;DR: In this paper, a microeconomic model of price setting is used to show that lower pass-through is caused by lower perceived persistence of cost changes, suggesting that the low inflation itself has caused the low passthrough, and an economy-wide model consistent with the micromodel is presented to illustrate how such changes in pricing power affect output and inflation dynamics in favorable ways, but can disappear quickly if monetary policy and expectations change.