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Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia

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Author Info
Peter Rowland ()
Abstract

This study uses an econometric framework based on an unrestricted vector autoregressive (VAR) model to study exchange rate pass-through to import, producer and consumer prices in Colombia. Exchange rate pass-through is shown to be incomplete. Import prices, nevertheless, respond quickly to an exchange rate change, where some 80 percent of such a change is passed onto prices of imports within 12 months. The corresponding figure for producer prices is 28 percent and for consumer prices 8 percent. We can, consequently, conclude that pass-through is modest for producer prices and very limited for consumer prices. An exchange rate shock does, therefore, only have limited impact on consumer price inflation.

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Article provided by BANCO DE LA REPÚBLICA - ESPE in its journal ENSAYOS SOBRE POLÍTICA ECONÓMICA.

Volume (Year): (2004)
Issue (Month): ()
Pages:
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Handle: RePEc:col:000107:002684

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Feinberg, Robert M, 1991. "The Choice of Exchange-Rate Index and Domestic Price Passthrough," Journal of Industrial Economics, Blackwell Publishing, vol. 39(4), pages 409-20, June. [Downloadable!] (restricted)
  2. Kim, Ki-Ho, 1998. "US Inflation and the Dollar Exchange Rate: A Vector Error Correction Model," Applied Economics, Taylor and Francis Journals, vol. 30(5), pages 613-19, May. [Downloadable!] (restricted)
  3. George A. Kahn, 1987. "Dollar depreciation and inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Nov, pages 32-49. [Downloadable!]
  4. Stanley W. Kardasz & Kenneth R. Stollery, 2001. "Exchange rate pass-through and its determinants in Canadian manufacturing industries," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 719-738, August. [Downloadable!] (restricted)
  5. Ilan Goldfajn & Sergio R.C. Werlang, 2000. "The pass-through from depreciation to inflation : a panel study," Textos para discussão 423, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  6. Athukorala, Premachandra, 1991. "Exchange rate pass-through : The case of Korean exports of manufactures," Economics Letters, Elsevier, vol. 35(1), pages 79-84, January. [Downloadable!] (restricted)
  7. Ilan Goldfajn & Sérgio Ribeiro da Costa Werlang, 2000. "The Pass-through from Depreciation to Inflation: A Panel Study," Working Papers Series 5, Central Bank of Brazil, Research Department. [Downloadable!]
  8. Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Blackwell Publishing, vol. 9(2), pages 197-231, June.
  9. Jonathan McCarthy, 2000. "Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies," Staff Reports 111, Federal Reserve Bank of New York. [Downloadable!]
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  10. Kim, Yoonbai, 1991. "External Adjustments and Exchange Rate Flexibility: Some Evidence from U.S. Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 176-81, February. [Downloadable!] (restricted)
  11. Sven W. Arndt & J. David Richardson, 1988. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November. [Downloadable!] (restricted)
  13. Joseph E. Gagnon & Jane Ihrig, 2001. "Monetary policy and exchange rate pass-through," International Finance Discussion Papers 704, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  14. Rudiger Dornbusch, 1987. "Exchange Rates and Prices," NBER Working Papers 1769, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June. [Downloadable!] (restricted)
  16. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
  17. Giovanni P. Olivei, 2002. "Exchange rates and the prices of manufacturing products imported into the United States," New England Economic Review, Federal Reserve Bank of Boston, issue Q 1, pages 3 - 18. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Juan Carlos Parra Alvarez, 2008. "Hechos Estilizados de la Economía Colombiana:Fundamentos Empíricos para la Construcción y Evaluación de un Modelo DSGE," BORRADORES DE ECONOMIA 004602, BANCO DE LA REPÚBLICA. [Downloadable!]
    Other versions:
  2. Carlos A. Ibarra, 2007. "Is Latin America Overcoming its Fear of Floating?," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(130), pages 183-209. [Downloadable!]
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