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Monetary policy and exchange rate pass-throughThis article is a U.S. Government work and is in the public domain in the U.S.A.
Author info | Abstract | Publisher info | Download info | Related research | Statistics Joseph E. Gagnon (Board of Governors of the Federal Reserve System, USA)
Jane Ihrig (Board of Governors of the Federal Reserve System, USA)
The pass-through of exchange rate changes into domestic inflation appears to have declined in many countries since the 1980s. We develop a theoretical model that attributes the change in the rate of pass-through to increased emphasis on inflation stabilization by many central banks. This hypothesis is tested on 20 industrial countries between 1971 and 2003. We find widespread evidence of a robust and statistically significant link between estimated rates of pass-through and inflation variability. We also find evidence that observed monetary policy behaviour may be a factor in the declining rate of pass-through. Published in 2004 by John Wiley & Sons, Ltd.
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics .
Volume (Year): 9 (2004)
Issue (Month): 4 ()
Pages: 315-338
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Handle: RePEc:ijf:ijfiec:v:9:y:2004:i:4:p:315-338Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/1076-9307/
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New England Economic Review ,
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