Inflation and Exchange Rate Pass-Through

Ha, Jongrim ; Stocker, M. Marc ; Yilmazkuday, Hakan

World Bank, Washington, DC

关键词: INFLATION;    EXCHANGE RATES;    MONETARY POLICY;    FOREIGN EXCHANGE;    EXCHANGE RATE PASS-THROUGH;   

DOI  :  10.1596/1813-9450-8780
RP-ID  :  WPS8780

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The degree to which domestic pricesadjust to exchange rate movements is key to understandinginflation dynamics, and hence to guiding monetary policy.However, the exchange rate pass-through to inflation variesconsiderably across countries and over time. By estimatingstructural factor-augmented vector-autoregressive models for47 countries, this paper brings to light two fundamentalfactors accounting for these variations: the nature of theshock triggering currency movements and country-specificcharacteristics. The empirical results in this paper arethree-fold. First, an empirical investigation demonstratesthat different domestic and global shocks can be associatedwith widely different pass-through ratios. Second, countrycharacteristics matter, including policy frameworks thatgovern monetary policy responses, as well as otherstructural features that affect an economy'ssensitivity to currency fluctuations. Pass-through ratiostend to be lower in countries that combine flexible exchangerate regimes and credible inflation targets. Finally, theempirical results suggest that central bank independence cangreatly facilitate the task of stabilizing inflationfollowing large currency movements and allows fuller use ofthe exchange rate as a buffer against external shocks.