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Understanding changes in exchange rate pass-through

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  • Yelena Takhtamanova

Abstract

Recent research suggests that there has been a decline in the extent to which firms “pass through” changes in exchange rates to prices. Beyond providing further evidence in support of this claim, this paper proposes an explanation for the phenomenon. It then presents empirical evidence of a structural break during the 1990s in the relationship between the real exchange rate and CPI inflation for a set of fourteen OECD countries. It is suggested that the recent reduction in the real exchange rate pass-through can be attributed in part to the low-inflation environment of the 1990s.

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Bibliographic Info

Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2008-13.

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Date of creation: 2008
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Handle: RePEc:fip:fedfwp:2008-13

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Keywords: Foreign exchange rates;

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References

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  1. Kenneth Rogoff, 1992. "Traded Goods Consumption Smoothing and the Random Walk Behavior of the Real Exchange Rate," NBER Working Papers 4119, National Bureau of Economic Research, Inc.
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  3. Yelena Takhtamanova, 2008. "Understanding changes in exchange rate pass-through," Working Paper Series 2008-13, Federal Reserve Bank of San Francisco.
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Citations

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Cited by:
  1. Winkelried, Diego, 2011. "Traspaso del tipo de cambio a la inflación," Revista Moneda, Banco Central de Reserva del Perú, issue 148, pages 4-7.
  2. Yelena Takhtamanova, 2008. "Understanding changes in exchange rate pass-through," Working Paper Series 2008-13, Federal Reserve Bank of San Francisco.
  3. International Monetary Fund, 2012. "Exchange Rate Pass-Through in Sub-Saharan African Economies and its Determinants," IMF Working Papers 12/141, International Monetary Fund.
  4. Rajmund Mirdala, 2014. "Exchange Rate Pass-Through to Domestic Prices under Different Exchange Rate Regimes," William Davidson Institute Working Papers Series wp1070, William Davidson Institute at the University of Michigan.
  5. Daniels, Joseph P. & VanHoose, David D., 2013. "Exchange-rate pass through, openness, and the sacrifice ratio," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 131-150.
  6. Winkelried, Diego, 2011. "Exchange rate pass-through and inflation targeting in Peru," Working Papers 2011-012, Banco Central de Reserva del Perú.
  7. Jimborean, Ramona, 2013. "The exchange rate pass-through in the new EU member states," Economic Systems, Elsevier, vol. 37(2), pages 302-329.
  8. Winkelried, Diego, 2012. "Traspaso del tipo de cambio y metas de inflación en el Perú," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 23, pages 9-24.
  9. Naz, Farah & Mohsin, Asma & Zaman, Khalid, 2012. "Exchange rate pass-through in to inflation: New insights in to the cointegration relationship from Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2205-2221.
  10. Mumtaz, Haroon & Sunder-Plassmann, Laura, 2010. "Time-varying dynamics of the real exchange rate. A structural VAR analysis," Bank of England working papers 382, Bank of England.

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