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Monetary policy and exchange rate pass-through
Joseph E. Gagnon,Jane E. Ihrig +1 more
TLDR
In this paper, the authors developed a theoretical model that attributes the change in pass-through (defined as the correlation of inflation with exchange rate changes) to increased emphasis on inflation stabilization by many central banks.Abstract:
Recent research suggests that the pass-through of exchange rate changes into domestic inflation has declined in many countries since the 1980s. We develop a theoretical model that attributes the change in pass-through (defined as the correlation of inflation with exchange rate changes) to increased emphasis on inflation stabilization by many central banks. This hypothesis is tested on eleven industrial countries between 1971 and 2000. We find widespread evidence of both a decline in pass-through and a decline in the variability of inflation in the 1990s. We also find a statistically significant link between measured pass-through and inflation variability. However, our efforts to correlate the decline in pass-through with estimated changes in monetary policy behavior are inconclusive due to poor estimates of policy behavior.read more
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Exchange Rate Pass-Through into Import Prices
TL;DR: The authors provide cross-country and time series evidence on the extent of exchange rate pass-through into the import prices of 25 OECD countries, and conclude that macroeconomic variables have played only a minor role in accounting for the evolution of OECD passthrough over time.
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Exchange Rate Pass-through into Import Prices
TL;DR: The authors argued that low import price pass-through means that nominal exchange rate fluctuations may lead to lower expenditure-switching effects of domestic monetary policy and as a consequence, monetary policy effectiveness is greater for stimulating the domestic economy.
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Testing for Indeterminacy: An Application to U.S. Monetary Policy: Reply
TL;DR: In this article, the authors considered a prototypical New Keynesian model, in which the equilibrium is undetermined if monetary policy is "passive" and extended the likelihood-based estimation of dynamic equilibrium models to allow for indeterminacies and sunspot fluctuations.
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Exchange Rate Pass-Through to Domestic Prices: Does the Inflationary Environment Matter?
Ehsan U. Choudhri,Dalia Hakura +1 more
TL;DR: 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.
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Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies
TL;DR: In this article, the authors present a survey of the state-of-the-art technologies used in the development of the VAR-VAR-MULTI-LIFT algorithm.