The pass-through from depreciation to inflation: Chile 1986-2001
AbstractA microeconomic model of imperfect Cournot competition is used to derive an explicit endogenous relationship between price level and the nominal exchange rate. We obtain a mark-up that varies endogenously with consumer real income. Using the model, the estimated pass-through –namely the impact of devaluation on inflation– ranges between 9-11% in the short run and between 21-32% in the long run for the period 1986-2001. However, the data supports a structural change in 1991, after which the pass-through coefficient declines significantly. Moreover, contrary to conventional wisdom, we find no evidence of procyclical pass-through.
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Bibliographic InfoArticle provided by University of Chile, Department of Economics in its journal Estudios de Economia.
Volume (Year): 30 (2003)
Issue (Month): 1 Year 2003 (June)
Exchange rate; Devaluation; Pass-through; Inflation; Endogenous Mark-up; Oligopolistic Cournot Competition.;
Other versions of this item:
- Carlos Noton, 2003. "The Pass-through from Depreciation to Inflation: Chile 1986-2001," Working Papers wp202, University of Chile, Department of Economics.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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